Income tax break for Georgians passes General Assembly amid opposition

State lawmakers passed an income-tax cut for Georgians on Thursday that aims to give taxpayers relief amid the COVID-19 pandemic, though critics warn it could cost the state millions of dollars in emergency aid.

The tax-cut bill, sponsored by Georgia Rep. Shaw Blackmon, R-Bonaire, would let Georgians pay less income tax starting July 1 amid a rebound of the state economy during the COVID-19 pandemic, following up on a previous reduction passed in 2019 that lowered the state’s income- tax rate from 6% to 5.75%. Republican lawmakers had planned to reduce the income-tax rate further last year to 5.5% but paused that move last March as the pandemic took hold, shuttering Georgia businesses and hammering state revenues for months through the summer. Blackmon, who chairs the House Ways and Means Committee, framed his tax-cut proposal as a more “modest and measured” cut than what was pitched last year, allowing Georgians “to keep their hard-earned money.” Under the bill, the state’s standard deduction for married couples who file joint returns would increase by $1,100. Single taxpayers could deduct an extra $800, while Georgians ages 65 and older could deduct another $1,300. Married couples filing separately could deduct an additional $550.

Blackmon’s bill passed by a 35-15 vote in the Senate nearly along party lines, with Democratic Sen. Jen Jordan of Atlanta voting in favor. It passed unanimously in the House and now heads to Gov. Brian Kemp’s desk for his signature.

The higher deductions could save Georgia taxpayers an estimated $140 million in taxes – roughly $100 each for married couples – that they would otherwise have to pay. Or the cuts would cost that amount in revenue for state services, depending on one’s view of government as a taxing authority.

Supporters say Georgia taxpayers deserve a break after a year of financial hardships brought by the pandemic, especially with the state’s economy ticking up as businesses reopen and workers resume their jobs. “We’re a conservative state [and] we want to be moderate in what we do with our tax code,” said state Sen. Larry Walker III, R-Perry, who carried the bill in the Senate. “We do want to give a break to hard-working Georgians, and that’s what this bill does.” Critics said passing a tax break now could cause the state to lose out on millions of federal dollars set to arrive in the $1.9 trillion COVID-19 aid package Congress passed last week, owing to a provision barring states from lowering taxes while using the emergency aid money.

Georgia could stand to lose nearly $200 million over the next two years by putting the income-tax cut into effect, said Danny Kanso, senior policy analyst with the nonprofit Georgia Budget and Policy Institute.

Rather than risking the loss of federal relief, Democratic state lawmakers have pushed for sending Georgia taxpayers direct payments instead of cutting taxes as well as tapping into more federal money offered in the emergency package by fully expanding Medicaid.

“If we really are very intent on getting hard-working Georgians the amount of money we’re talking about in this legislation … we can do that as a direct payment without jeopardizing the $140 million we would still get,” said Sen. Elena Parent, D-Atlanta.

Amid Democratic opposition, top state Republicans including Kemp and House Speaker David Ralston, R-Blue Ridge, have slammed the federal aid package over the penalties for states that seek to cut taxes, as well as the funding formula for Georgia’s share of the relief.

“In Georgia, we have prioritized providing tax relief to our citizens, and [the COVID-19 aid package] appears to prohibit that relief,” Ralston said in a March 10 letter to President Joe Biden. “I pray that you will prevail upon Congress to have this flaw in the legislation corrected before signing it into law.”

Biden signed the aid package last Friday with the tax-cut penalty intact.