ATLANTA — Georgia House Speaker David Ralston announced Tuesday a bill to revamp the state's income tax structure that would, he said, reduce Georgians' state tax bills by $1 billion annually.
The bill, H.B. 1437, would replace a current staggered income tax structure in Georgia. Currently, earned income beyond whatever you don't need to count due to deductions and credits is taxed at increasing rates up to $7,000 for single filers and $10,000 for married joint filers, and then at 5.75% beyond those thresholds.
Instead, the bill would establish a flat 5.25% rate for all taxable income.
In order to avoid that actually increasing the tax liability for those whose taxable income is below the current thresholds, the bill would greatly increase the standard deduction - the base amount of money you make before the state starts taxing it - from $4,600 for single filers and $6,000 for married joint filers to $12,000 and $24,000, respectively.
“Lowering taxes will let families keep more of their hard-earned money,” Ralston said in a statement. “In these times when Washington is letting inflation skyrocket, it is up to us to keep our state government lean and help Georgians when the cost of everything is rising. I am proud that this will mark the third time as Speaker that I will preside over the passage of a tax cut – another step in our continuing efforts to lower taxes for Georgia families.”
The cut would take effect for the 2024 calendar year, according to Ralston's office.
How it works
At the low end, think of it this way - if you're a single individual and make $10,000 for the year, without any other deductions or credits, your taxable income would currently be $5,400 after the $4,600 standard deduction.
Under current structures, your state income tax bill would then be about $160. Under the new plan, the standard deduction of $12,000 would clear your income entirely, and your tax bill would be $0.
If it was $15,000, for instance, your bill would currently be for $10,400 after the deduction. That would cost about $230 up to the max tax threshold of $7,000 and then an additional roughly $195 at the max 5.75% rate for your last $3,400.
Ralston's proposal with the increased standard deduction of $12,000 would leave you with $3,000 taxed at a 5.25% rate - about $158 in total. So you'd save about $267.
At the higher end, say you make $100,000 - under the current system, without other deductions your liability would be a little more than $5,300 - free for the first $4,600, about $230 on the next $7,000, and then about $5,080 at a 5.75% rate on the next $88,400.
Under the proposed new system, it would be a bit more than $4,600 - free for the first $12,000, and then about $4,600 at a 5.25% rate on the next $88,000.
Flat-tax critiques
Critics of flat-tax proposals (including in Iowa, where one was just passed) generally contend that they save more money for higher-income earners than they do for lower-income earners, and deprive state agencies of funds that lower-income earners disproportionately rely on.
Additionally, the tax system revamp would come as Georgia has yet to restore full funding to many state agencies that saw cuts at the outset of the pandemic, when the legislature instituted a 10% budget reduction across the board.
Gov. Brian Kemp in January announced the state had a $1.6 billion surplus, as the state enjoyed revenues that turned out not to be severely impacted by the pandemic.
The governor announced his intentions to issue tax refund checks of $250-500 to Georgia taxpayers, rather than direct the money back into public agencies. The new tax proposal would effectively bank any continuing future revenue surpluses as a result of the cuts into the lower statewide tax rates.