(The Center Square) – Gov. Brian Kemp signed a bill Monday that reduces the state income tax rate by 0.125% until it reaches 3.99%, but it comes with a condition.
House Bill 463 requires the state to meet revenue benchmarks, or the income tax rate will not be lowered.
One of the three benchmarks included in the bill requires the governor’s revenue estimate to increase by at least 3%. The tax cuts could also be delayed for a year if the prior year’s fiscal net revenue collection is not higher than the collections in each of the three preceding years.
The third condition halts the tax cut if the Revenue Shortfall Reserve lacks the funds to cover the losses, according to the bill.
Kemp, in his final months as governor, said the bill fulfills his promise to slash the income tax rate below 5%. Georgia’s flat tax rate is 5.19%. The legislation reduces it to 4.99% beginning with the current tax year.
“We’ve remained the No. 1 state for business for a historic 12 consecutive years because of our commitment to growing opportunity and budgeting conservatively,” Kemp said, referring to a ranking by Area Development magazine.
The revenue benchmarks also apply to a reduction in the standard deduction from $24,000 to $30,000 for married couples and from $12,000 to $15,000 for single filers. Not meeting one of the three could delay the decrease for a year.
Also included in the bill is an exemption of $1,750 of overtime and tips from state income tax through Dec. 31, 2028.
The tax breaks begin with the 2026 tax year.
The bill stopped short of a complete plan to eliminate the state’s income tax entirely, the goal of a Senate study committee that held a series of meetings on the topic.
Two of Georgia’s neighbors, Tennessee and Florida, do not levy a state income tax.
“Nine other states have already figured out how to eliminate their income tax. Georgia should too,” Sen. Blake Tillery, R-Vidalia, said in an email to The Center Square before the session began.
House Speaker Jon Burns proposed eliminating homestead property taxes but was unsuccessful. In the end, Senate Bill 33, signed by Kemp on Monday, created a new sales tax that cities and counties could levy to offset property taxes. The bill also caps valuations at the rate of inflation.
“Now as we all know, property tax valuations have skyrocketed in every quarter of this state. Millage rates have remained the same or even increased in some cases, placing a significant financial strain on families, homeowners and retirees living on a fixed income,” Burns said.
