ATLANTA — Today, the Georgia Senate Special Committee on the Elimination of Georgia’s Income Tax released its final report and recommendations. Importantly, the committee found that about three quarters of all personal income taxes in Georgia are generated from those earning over $100,000 annually, meaning that the benefits from eliminating the income tax would be similarly regressive. That logic informs the centerpiece of the committee’s recommendations: increasing the state’s standard deduction up from $12,000 for single filers and $24,000 for married couples filing jointly to $50,000 and $100,000, respectively. While cuts to the state’s flat income tax rate are extremely costly and inefficient in reaching most Georgians, increases to the standard deduction would offer more meaningful relief to working and middle-class households.
The committee’s report finds that households earning less than $100,000 per year comprised approximately 71% of all personal income tax filings but represented just 26% of overall personal income tax collections at $3.98 billion of $15.47 billion (FY 2023). The committee did not make specific recommendations to replace revenue losses aside from spending down reserves and financing more capital projects instead of paying cash. If the committee’s full proposal is enacted, it is likely that most Georgians would end up paying higher state taxes instead of receiving a net tax cut. Alternatively, without replacing these revenues, Georgia could see $16 billion in lost funding by 2032, equivalent to 47% of state general funds and more than the state currently spends on PreK-12 education ($14.5 billion in FY 2026).
“This proposal would dramatically push Georgia’s budget out of balance in order to enrich those already at the top of the economic ladder, while working and middle-class families ultimately foot the bill,” said Daniel Kanso, PhD, Senior Fiscal Analyst at the Georgia Budget & Policy Institute. “Although the proposal makes no specific recommendations for how Georgia would replace about half its General Fund revenues, it makes clear that 74% of all benefits (estimated at $11.49 billion annually) would go to households earning six-figures or more per year. The committee’s lack of specific recommendations to replace Georgia’s largest revenue source speaks volumes and points towards the most likely outcome: increasing Georgia’s sales tax and raising the cost of living. While most Georgians would see an average net tax increase of about $1,000 per year if the state shifts to a sales tax-based revenue system, those in the top 1% (earning more than $835,000 per year) would see average tax cuts of about $60,000 per year.”
The Georgia Budget & Policy Institute will host a webinar on Thursday, January 8 at 2:00 PM to deliver an overview of the potential effects of eliminating Georgia’s income tax and to offer further commentary on report from the Senate Special Committee on the Elimination of Georgia’s Income Tax. You can register for the webinar here. GBPI also recently released Breaking the Bank: Eliminating the State Income Tax Harms Georgians and Increases the Cost of Living, which you can read here.
