Income tax

GOP hopes for 2022 want to eliminate state income tax


Legend

Georgia Revenue Sources

Credit: Isaac Sabetai

Georgia Revenue Sources
Legend

Georgia Revenue Sources

Credit: Isaac Sabetai

Credit: Isaac Sabetai

House Appropriations Speaker Terry England R-Auburn, who has voted to lower the income tax rate in the past, said eliminating it altogether could spell disaster for the state’s finances .

“Well, either you are taking K-12 education out – that’s about what we’re putting into it – or if you don’t want to get rid of it, I think you’d end up with a 17% sales tax to make up for lost revenue if you don’t change the base.

Senatorial Minority Leader Gloria Butler D-Stone Mountain has been more direct about the politics behind the proposals.

“Beware of those shiny items that sell,” Butler said. “You just can’t take half of the state’s revenue and expect it to have no impact.

“Such a move would destroy public schools, our university system and many other services that Georgians rely on. Make no mistake, those who peddle this scheme will find the money somewhere, and it will likely come out of our pockets in the form of a sales tax. “

England said the current composition of state revenue – which comes mainly from the 5.75% income tax and 4% sales tax – has kept finances stable and allowed it is up to Georgia to balance its budget every year. Georgia has maintained an AAA bond rating for decades – meaning it can borrow money at the lowest interest rates – and bond rating agencies often cite the income mix as one reasons why.

But detractors of the income tax say its elimination would make Georgia more competitive when it comes to attracting high net worth businesses and individuals wishing to relocate and invest in the state.

The taxes the state collects help it educate 2 million children, provide health care to over 2 million Georgians, manage and improve parks, investigate crimes and incarcerate criminals , and regulate insurance companies, utilities and dozens of professions. The state issues driver’s licenses and helps pay for nursing home care for the elderly.

The state is a major provider of mental health and addiction treatment, and it helps fund public health programs that fight the coronavirus pandemic. In addition to paying salaries, it helps ensure that hundreds of thousands of former teachers, academics and government employees receive pensions and health care.

Some Republicans have been pushing for lower income tax rates for years. Miller’s main Republican opponent in the lieutenant governor’s race, State Senator Burt Jones, R-Jackson, has called for cuts in income tax rates.

Perdue notes that neighboring Florida and Tennessee do not have state income tax. Both states are hotspots for tourism and fundraise through other taxes to finance their budgets.

Perdue’s cousin Sonny Perdue first ran for governor in 2002 on a promise to eliminate state income taxes on non-work income – investments, pensions, etc. . – earned by the elderly. His argument was that it would either attract wealthy retirees or prevent those already in Georgia from moving to Florida. We do not know if this is the case.

The General Assembly approved his proposal, although it was capped during the Great Recession because the state could not afford to lose about $ 1 billion in annual revenue.

As a United States Senator, Perdue was one of the main supporters of the massive income tax reduction legislation that Republican-dominated Congress approved in late 2017. But Congress did not cut spending to make up for it. loss of income. Unlike Congress, the state of Georgia must legally balance its budget every year.

Kemp campaign spokesman Cody Hall noted that the incumbent and the General Assembly balanced the state budget and granted an income tax cut during the COVID-19 pandemic.

In contrast, Hall said, after promising to limit spending in Washington, Perdue left office with the federal government amid a hugely inflated national debt. This was in part due to lower taxes, but also massive federal spending to combat the pandemic and the temporary collapse of the economy.

Hall said: “His empty campaign rhetoric doesn’t match his record.”

When asked how the state would compensate for lost income if income taxes were eliminated, Miller, the candidate for lieutenant governor, said, “We will follow the best practices of other states that do not collect taxes. no income taxes. Georgia has a surplus and I think the money should go back to the taxpayers.

“Florida and Tennessee don’t have income taxes and they make it work. We can too.

A state official has previously considered a proposal that would phase out income taxes and compensate for lost income by increasing the state’s sales tax from 4% to 7% and broadening the base to include services tax, such as using a real estate agent, financial advisor or dry cleaning, or for maintenance or repair work at your home.

With local sales taxes included, consumers would pay, for example, a sales tax of around 12% in Atlanta.

Even in this scenario, the state would lose hundreds of millions of dollars for a few years before sales taxes began to eclipse old income tax receipts, according to state auditor report .

England have said they do not expect the legislation to be passed in the next session in 2022.