A Republican state senator says he plans to introduce legislation this week to decrease the personal income tax rate in Georgia from 6 percent to a flat rate of 5.4 percent.
State Senator Judson Hill (R-Marietta) said the “Tax Relief Act of 2016” would also increase personal exemptions by $2,000 per person, while maintaining the current sales tax rate of 4 percent.
“I believe it’s very important that we continue to compete across the South and across the United States right now,” Hill said. He cited other states, like North Carolina, which have recently cut their personal income taxes.
Hill said any revenue loss from the cut would already be made up from the state's strong revenue growth. In the fiscal year 2017 budget, the the state estimates it will collect about $800,000 more than the amended fiscal 2016 budget – not counting new transportation money from what lawmakers approved last year.
"I've always thought that the state often has a spending problem, not a revenue problem. But all we're doing is reducing the increase," Hill said.
A growth of about $800,000, or about 4 percent, however, also roughly tracks with the growth in population and inflation, according to Carolyn Bourdeaux, director of the Center for State and Local Finance at Georgia State University.
Wesley Tharpe, a policy analyst with the Georgia Budget and Policy Institute, cautioned of tax changes that could largely affect the state treasury.
“Georgia really has just dug itself out of the hole that was caused by the economic crisis of the Great Recession that really decimated the state's revenues and its ability to fund services,” said Tharpe said.
Sen. Hill would need help from the House on his personal income tax reduction proposal. Any bills dealing with revenue have to originate in the House.
Last year, state representative John Carson (R-Marietta) filed a bill that would also reduce personal income tax, but increase the state sales tax. Hill says his bill isn’t similar to that proposal.
“I don’t touch the sales tax rate at all,” Hill said. He said he's been in touch with members in the other chamber about a possible House version of the bill.
Hill said he plans to file an accompanying bill for a constitutional amendment. The amendment would trigger further reductions in personal income taxes to a floor rate of 5 percent depending how well the state’s revenues are doing and if there’s at least $1.7 billion in the state’s reserves.