ATLANTA — Georgia lawmakers learned Wednesday how much it might cost to eliminate the state income tax – a proposal a Republican lawmaker said he will make this year.
The price tag is $3 billion in 2025.
For years conservatives have broadly pitched switching to what they call the "fair tax."
"Completely eliminate the state income tax. It’s time," former U.S. Sen. David Perdue said in the video he released announcing his candidacy for governor in late 2021.
Though voters rejected Perdue, state Rep. Emory Dunahoo (R-Gillsville) has embraced Perdue’s tax proposal.
"We bring forth a broad-based consumption tax," Dunahoo said. "It’s been broken for way too many years."
The proposal would
- Eliminate the state income tax
- Eliminate the state’s four percent sales tax
- And replace it all with a new sales tax which Dunahoo calls a consumption tax of 7.5% to 8%.
- That would be in addition to local taxes collected by cities and counties
It would put the sales tax at about 16% to 17% in the city of Atlanta.
The state audit says that the money lost from income tax would far exceed the proceeds from the "consumption" tax replacing it to the tune of $3.17 billion in 2025. The audit says the deficit would grow larger in subsequent years.
"Really for most Georgians, what this would represent is a massive tax increase-- the largest tax increase of their lifetimes," Danny Kanso said, a fiscal analyst at the left-leaning Georgia Budget Policy Institute.
The fair tax would also require Georgians to pay taxes on groceries that are currently exempt from sales taxes.
Kanso said it would also burden lower-income taxpayers with a larger share of state taxes than they pay now. "That’s going to be less money in their pockets," he said.
Republicans who favor the fair tax say it would simplify the tax system and attract business to Georgia – an attractive conservative pitch in a campaign year, but maybe a tougher sell in the 2023 legislature.