What’s needed to cut state taxes? Try a little modesty

A money changer counts U.S. dollar bills at a currency exchange office in central Istanbul

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.”

Reader Comments 0

35 comments
AvgGeorgian
AvgGeorgian

How about we reduce the income tax this way:


We use a per person poverty threshold amount of $10K per person as the starting point to pay taxes.


We start at 1% of the next $10K of income and continue to add 1% per 10k until we graduate the % to the level needed to produce projected revenue requirements.


This way everyone gets a tax cut on their 1st 60K of income but may pay more on the amount over 60K. The savings will be more for families.

Lil_Barry_Bailout
Lil_Barry_Bailout

@AvgGeorgian

You're not reducing taxes one bit.

You just want to shift them from takers to makers.

Everyone needs to have enough skin in the game so that it hurts when our elected leaders decide to spend more.

AvgGeorgian
AvgGeorgian

@Lil_Barry_Bailout @AvgGeorgian

Lil Baba, to hurt those making over a $milllion dontcha think we would have to tax em over 5%? 


Also the job makers are the folks who spend 100% oftheir income on goods and services, not the ones who save and "invest".

Hedley_Lammar
Hedley_Lammar

Perhaps Kansas has tempered the tax cut increases revenues nonsense.

It' could be worse I guess. They could be trying that here. Kyle would be dutifully promoting it.

JFMcNamara
JFMcNamara



This doesn't make any sense Kyle.  How can a tax cut reduce revenues?  Won't that spur infinite growth therefore propelling Georgia to be the wealthiest state in the history of America? /s/   Real Talk. Your article goes against everything you've said about Tax cuts in the last 10 years.  If cutting tax rates in Georgia reduces tax revenue, how and why is it different at the federal level.  Is all that stuff about tax cuts and growth just a lie to get tax cuts?



JFMcNamara
JFMcNamara

@Kyle_Wingfield @JFMcNamara  , I can't find the archives going back further than 2013.  I vividly remember it, however, as I commented at the time that tax cuts were the answers to all of our problems...

Kyle_Wingfield
Kyle_Wingfield moderator

@JFMcNamara Kindly point to any article I've ever written that claims tax cuts create more revenue.

Spoiler alert: The closest you will come is -- maybe -- finding something where I said growth would offset some of the loss. Which is almost certainly true. But I've never said "tax cuts pay for themselves," the caricature you seem to be attributing to me.

Lil_Barry_Bailout
Lil_Barry_Bailout

Georgia's budgeting would be so much easier if the folks who voted for Obama would just purchase health insurance like they were told.

Unfortunately, they haven't, and so the folks who pay America's bills will have to clean up this mess too.

And no, even MORE handouts are not the answer, so don't even start.

Wascatlady
Wascatlady

Here is a novel idea: Cut out the sweetheart deals!

Lil_Barry_Bailout
Lil_Barry_Bailout

@Wascatlady

So the free rider Democrats (oops, three words when one would do) are going to start paying taxes just like everyone else?

Wascatlady
Wascatlady

@Lil_Barry_Bailout @Wascatlady So the Gulfstreams of this country will pay the taxes they owe JUST LIKE OTHER BUSINESSES DO.  So those Georgians who contribute to private schools for a tax write-off have to pay the state taxes on their money JUST LIKE EVERYONE ELSE.

Lil_Barry_Bailout
Lil_Barry_Bailout

@Wascatlady @Lil_Barry_Bailout

The deduction for contributing to private schools is available to all, so that complaint is inoperative.  And if you have evidence Gulfstream isn't paying the taxes they owe, do share it with the state's attorney.

Cobbian
Cobbian

@Lil_Barry_Bailout @Wascatlady the tax cut is only available to those who can afford to make the contribution in the first place.  The public has no responsibility to make up for the fact that someone wants to make a contribution to a private school - we have public schools which we all support with our taxes.  If the private school gets a tax cut someone has to make up for the taxes he doesn't pay.  I do not volunteer to subsidize private school education.  

TicTacs
TicTacs

Republicans will promise everything, pay for nothing.

Lil_Barry_Bailout
Lil_Barry_Bailout

@Jefferson1776

Republican tax payers pay most of the bills and Republican politicians are somewhat restrained about wasting tax payer money on things like Medicaid expansion, so your post makes zero sense.

lvg
lvg

How about  we just  draw water from the Chatahoochee without  all that expensive filtering nonsense . We could save a lot of money and lower our property taxes tooand we could defund Marta and save on the sales tax.  Worked for Republicans in Michigan.

RoadScholar
RoadScholar

Kyle before we cut the rate, how about totally and adequately funding the teachers and state employees retirement funds. The teachers fund is nearly 100% funded, but the state employees fund is at 80% at best. Then look at all the special fees that go to programs...i.e. tire disposal and other items that are not clearly monitored or accountable. Get our financial house in order.

Kyle_Wingfield
Kyle_Wingfield moderator

@RoadScholar Typically, if a pension fund is at 70% funding or better, it's considered financially sound. So there's nothing wrong with Georgia's fund being in the 80s.

McGarnagle
McGarnagle

So are the tax cuts the same across the board or are they by income brackets?

Kyle_Wingfield
Kyle_Wingfield moderator

@McGarnagle Georgia currently has six brackets, the highest of which starts at $7,000 (single filer) or $10,000 (married filing jointly) of taxable income. So the income brackets are very compressed. This would replace all of those with a single bracket, at 5.4%. Because the amount of personal exemptions would be increased, the average person would see savings.


Kyle_Wingfield
Kyle_Wingfield moderator

@McGarnagle By "average person" I mean the average person in each income group. So, the average person in the lowest quartile, the next-lowest, the middle, etc. No one can guarantee that every single person in the state would see a decrease with any change. But barring unusual tax circumstances, a Georgian ought to see a decrease.

xxxzzz
xxxzzz

@Kyle_Wingfield @McGarnagle Georgia is in the top 20 with its 6% rate and it gets to the top rate faster, usually much faster, than any of the states with higher rates.  And Florida has no income tax and Tennessee doesn't tax wages.  Alabama is 5%, S. Carolina is 7% for over $13,700.

Kyle_Wingfield
Kyle_Wingfield moderator

@xxxzzz "it gets to the top rate faster, usually much faster, than any of the states with higher rates"

This is also why a cut in the top rate will help all; you don't have to make much to be in the top bracket.

khcdec
khcdec

how long has the state had the 6% despite the growing demands of rising health care costs, aging infrastructure and more less wealthy people that might need help.  trickle down is not working,  tax cuts for some or many businesses questionable.

Kyle_Wingfield
Kyle_Wingfield moderator

@khckhc What about current state tax law do you consider to be "trickle down"? And what about a law that cuts taxes for everyone would be "trickle down"?

lvg
lvg

No concern by these clowns for the severe cut backs across the state in medical care at rural and trauma hospitals or in care for the disabled and the elderly as well as children's services. People dying because of the cutbacks is not a factor. Maybe we need the KKK to do its well known  political rallying for the disenfranchised. 

Truthyness
Truthyness

I do not like paying taxes anymore than the next person. But, when you respond to the call to: "cut taxes, and stop wasting our tax dollars, less regulation, less regulation." The money will have to come from somewhere, and that somewhere are usually agencies where we will not see the repercussions for years to come. Like schools and the department of family and children services. Remember that little girl who died from abuse, and no one checked on her from DFCS. Well it is not the agency, it is that they are short staffed, and short on budget. When you cut cost at those places, the kids are the one's who pay the price.

Kyle_Wingfield
Kyle_Wingfield moderator

@Truthyness This would not be a reduction in revenue. It would mean less of an increase. So (for illustrative purposes) if tax revenues are now at $100, and they were going to grow to $106 without the bill, with the bill they would grow to $105. That's still a revenue increase.

TheRealJDW
TheRealJDW

@Kyle_Wingfield @Truthyness So illustrativlly speaking  that means instead of having a $100 to put towards our $10,000 deficiencies in roads, schools and water infrastructure we only have $50.  Wow at that rate we will be flush in say 200 years.


Kyle_Wingfield
Kyle_Wingfield moderator

@TheRealJDW Your math suggests the state should be spending $2.3T per year. Just to illustrate how hyperbolic that comment was ...