![]() ![]() Benchmarks include ensuring that the state’s revenue estimate is increased by at least 3 percent annually. The removal of the provisions related to the film tax credit by the Senate Rules Committee likely renders the bill not viable to implement, as it eliminates the lone provision put forward by the Senate Finance Committee to raise sufficient revenue to help the state to meet the revenue benchmarks set forth. Last year, film tax credits granted by the state totaled $1.2 billion, equivalent to 4 percent of Georgia’s entire FY 2023 budget. These changes could result in a substantial increase in income tax collections. Changes to the film tax credit included in the version of HB 1437 passed by the Senate Finance Committee cap the value of credits at $900 million per year, and, more importantly, make the credit non-transferable and eliminate the ability of companies to profit from the sale of excess credits. Implementation of the full bill will rely on raising significant revenue to offset increasingly large reductions in income tax collections that would occur as the amount of income taxed at 4.99 percent increases over eight steps. An EITC would reduce income taxes for low to middle-income Georgians. The bill also includes a smaller increase in the personal exemption than the change included in the original House-passed version and a non-refundable state Earned Income Tax Credit (EITC) valued at 10 percent of the federal level. The legislation would shift to a graduated income tax with rates of 4.99 percent and 5.75 percent for at least eight years, while gradually lifting the amount of income taxed at 4.99 percent through a nine-step process that aims to transition the state to a flat tax on all income by 2032, but only state revenues increase steadily enough to satisfy benchmarks included in the bill. Members of the Senate Finance Committee made significant changes to fundamentally restructure most of the provisions of HB 1437. Although certain provisions of the legislation-such as raising the standard exemption offered to all tax filers and eliminating most itemized deductions for personal income taxes-would offer positive benefits to Georgia families if isolated, the package tilts significantly toward top earners because of the inclusion of a flat tax that increases the legislation’s cost by approximately $645 million annually. The bill would also eliminate most personal income tax itemized deductions while preserving those for charitable contributions and would raise the state’s standard exemption to nearly match the federal standard deduction. ![]() As passed by the House, the bill would shift from taxing personal income under a graduated income tax with rates between 1 to 5.75 percent to a flat tax of 5.25 percent. Members of the General Assembly are considering a range of proposals that could initiate the most significant changes in the state income tax in a generation through House Bill 1437, which could upend the state’s ability to meet its obligations or offer a path towards modernization and more take-home pay for Georgians. The deadline for final passage of any legislation is April 4, 2022 Legislators should focus on combining elements of both proposals to center the benefits of tax cuts on low- and middle-income Georgians and to ensure any final proposal is equitable for all families and would preserve the state’s fiscal health.Proposals advanced by both the House and Senate range in cost from $1 billion to $2 billion in potential revenue losses per year, which would mark a dramatic reduction in state revenues and threaten Georgia’s ability to meet its budget obligations if fully implemented.They can deploy federal funds received by the state through the American Rescue Plan. Legislators can strengthen this provision to make the credit fully refundable. The Senate version of the legislation includes a non-refundable Earned Income Tax Credit (EITC) at 10 percent of the federal level, which would focus tax relief on low- to moderate-income Georgians.Members are also considering ways to consolidate itemized tax deductions, which currently primarily benefit higher-income tax filers, with a higher standard exemption offered to all taxpayers.Proposals to shift Georgia’s current graduated income tax, where rates increase from 1 to 5.75 percent as income increases, to a flat tax carry high costs to the state and would primarily benefit the wealthiest through reductions to the state’s top income tax rate.Members of the House and Senate are debating a series of major changes to Georgia’s personal income tax in HB 1437. ![]()
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