State revenues have been growing by about $1 billion annually, with two prevailing reactions under the Gold Dome. One was relief, that deep, recession-induced budget cuts were being erased.
The other was disbelief, that the state could spend $1 billion more each year without trimming Georgians’ tax bills.
The second won’t yield to the first forever, and with the state budget finally moving from recovery to growth, the clamor for tax cuts is growing, too. But there remains caution about filling the state’s reserves and keeping its AAA bond rating, as well as skepticism about complicated tax-code rewrites that shift taxes here and broaden the base there, even if there are sound economic reasons for doing so.
So political considerations point toward a more modest approach, and Sen. Judson Hill just may have found it.
Hill, a sixth-term Republican from Marietta, has filed a pair of bills notably modest in their ambition. The first, Senate Bill 280, would flatten Georgia’s income tax to a single bracket of 5.4 percent. Because the bill would also increase exemptions for taxpayers and dependents by $2,000 per person, it should reduce tax bills up and down the income scale.
But because it would also limit deductions to those for mortgage interest payments (capped at $25,000), charitable gifts and medical spending, the bill would also be — here’s that word again — modest in its effect on state revenues. The number crunchers at Georgia State University estimate that, if the bill were passed this year, income-tax revenues would still rise amid a growing economy over the next five years. The increase would simply be $1.9 billion instead of $2.9 billion.
“It’s reducing the increase,” Hill told me. “And it’s doing that in a fiscally responsible way that we project we can more than provide all the essential government services and the growth in constitutionally mandated services,” such as education.
Because the income tax has accounted for a little less than half of recent revenue growth, the effect would be even more modest: For every $6 in expected revenue growth, the state would still get about $5.
The other bill, Senate Resolution 756, would amend the constitution to lower the tax rate to 5 percent, but only once certain requirements were met. The first trigger, Hill said he plans to put in a revision of the bill, would come when state general revenues, expected to be $22.5 billion in the next budget year, hit $23.5 billion — and when the state’s reserves hit 8 percent of that number, or $1.88 billion. The reserves are about $1.4 billion today.
Once both of those things happened, the income-tax rate would fall to 5.2 percent. It would drop to 5 percent only after general revenues hit $24.2 billion and reserves 8 percent of that, or about $1.94 billion.
The government, Hill said, can “either take more money from you and return the excess, or never take the excess in the first place. The purpose of these triggers is to reduce the money we take from taxpayers, and to provide greater certainty that we’re not increasing the size of government and adding expenses with the hope that one day it’ll stop.”