(The Center Square) – With just over two weeks left until the 2026 General Assembly adjourns, three tax bills that would cut state income taxes are still undecided amid questions about their cost.
The Senate Special Committee to Eliminate the Income Tax drafted two bills following a series of summer meetings. Both have passed in the Senate and are in the House.
Senate Bill 476 increases the standard deduction for married couples from $24,000 to $100,000 and from $12,000 to $50,000 for single filers and cuts personal income tax rates to 4.99%. Senate Bill 477 reduces the state income tax rate to 3.99%. Senate lawmakers say the bill package would put the state on the path to end the income tax in six years.
House Bill 880 would lower the rate by one-tenth of a point each year until it is 3.99% as part of a 10-year plan to eliminate the state income tax.
In making their case, lawmakers say eliminating Georgia’s income tax would make the state more competitive in attracting new businesses. Georgia’s neighbors, Tennessee and Florida, do not have an income tax.
The Senate Special Committee to Eliminate Georgia’s Income Tax heard from residents at an October meeting held in Gainesville.
Carli Jones told lawmakers she spends $28 a week on diapers and $70 a week on formula for her child.
“And in our household, when you see that line item of the state income tax coming out every month, it stings just a little bit because we are seeing those numbers, $28, $70 a week, daycare costs, different things like that, that are coming out of our budget that that state income tax could be going toward,” Jones told the committee.
Corporate and individual income taxes have the most “drag” on a state’s economy, Jannell Fritts, an analyst for the Tax Foundation, wrote in an editorial. But there is no “magic wand” to eliminate the income tax, she said.
“Lawmakers are coming from a place of good intentions, but – famously – paving a road with those doesn’t guarantee success,” Fritts said. “In fact, eliminating Georgia’s income tax would require trade-offs that may make the state worse off overall.”
Increasing the standard deduction and reducing the income tax rate would only leave a $9.8 billion hole in state revenues, according to an analysis by Dr. Daniel Kanso of the Georgia Budget and Policy Institute, who has followed the issue since the Senate committee meetings last year.
The bill passed the Senate in February, before a fiscal note showing the impact and how the lost revenue would be recouped was finalized. The March 5 fiscal note shows that eliminating the tax breaks would only create $1.8 billion by 2031.
“Unfortunately folks really want to talk about which taxes they’re going to cut,” Kanso said in an interview with The Center Square. “But they don’t want to tell us how they are going to pay for them and that could create some some really severe problems for the state down the road.”
The Senate Special Committee to Eliminate the State’s Income Tax pledged not to increase taxes on groceries or motor fuels at its September meeting.
“This leaves few options for raising revenue, and the remaining options would harm the state’s economy,” Fritts said.
Even if the state considers expanding the sales tax, it may still not be enough to make up for lost income tax revenue, according to Fritz. Based on fiscal year 2024 numbers, which include the grocery and fuel taxes, the state would still not bring in enough to cover the revenue needed to offset the loss of income tax.
“To bring in the right amount of money, the new sales tax base would have to include many business inputs, such as machinery, software and other digital services, HR and IT services, and the like, driving up the cost of doing business in the state,” Fritts said. “In turn, many businesses would raise prices, hire fewer Georgians, or simply leave the state so they don’t have to pay as much to function.”
Senate Bills 476 and 477 are in the House Ways and Means Committee. House Bill 880 is in the Senate Finance Committee.
