Politics & Government

Latest Tax Proposal Cuts Rate, Increases Deductions

Georgia lawmakers working to finalize tax reform legislation before the session ends.

With just three days remaining in the legislative session, Georgia lawmakers continue to hammer out a tax reform proposal that Republicans say will create jobs and Democrats claim will create large deficits.

The latest version of the tax reform bill, HB 388, will reduce the Georgia personal income tax rate from 6 percent to 4.6 percent. Instead of the $17,000 itemized deduction cap previously proposed for married couples filing jointly, HB 388 will allow itemized deductions up to $30,000 for married joint filers with Georgia adjusted gross income up to $75,000.  The deduction will be phased out for those with an adjusted joint income over $177,000. A $35,000 per year retirement income exclusion will be maintained and the child dependent exemption will increase from $3,000 to $5,300 per child.

On his website, Rep. Brett Harrell (R-Snellville) said HB 388 will result in fiscal year 2012 overall tax savings of $319 million. Harrell also said HB 388 will improve Georgia’s business competitiveness and encourage job creation by phasing out the sales tax on energy used in manufacturing and consolidating agricultural exemptions into a single exemption. According to Harrell, the cuts and exemptions will result in a loss of $110 million in revenue to the state over three years, but a portion of that lost revenue will be offset with a flat 7 percent tax on communication services, a tax on person-to person auto sales and a tax on automobile repair labor.

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“After carefully reviewing the 71-page, HB 388 and running my own analysis, I believe this compromise tax reform package is a significant improvement over today’s tax code and moves Georgia in a positive direction for both personal and business tax payers,” Harrell wrote. 

On the other side of the aisle, House Democrats claim the proposal will create a state budget deficit of approximately $128 million.

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"Republicans have created a tax reform bill in the shadows that couldn't survive in the light of day," said Rep. Stacey Abrams, minority leader for the House Democratic Caucus, in a released statement.

"At a time when we are trying to bring jobs to Georgia by supporting the Savannah Harbor, creating a budget deficit will certainly jeopardize this project.  It will also likely increase the cost of higher education, by requiring deeper cuts in the state budget," Abrams said.

Abrams, a tax attorney, called HB 388 “simply bad tax policy” and fiscally irresponsible.

"In a time of economic crisis, the GOP proposals create multi-million dollar holes in the state budget which will mean shifting the costs to taxpayers, through property taxes for schools and higher sales tax costs on vehicles, cell phones and satellite television. Their bills are fiscally irresponsible," Abrams said.

While Republicans are touting the latest proposal as a 23 percent tax reduction, Abrams said, in real terms, the reduction would equate to only about $15 per taxpayer.

"We need fiscal responsibility, not fiscal magic. Democrats are not willing to risk the wallets of Georgia's families. Bring us a proposal for good schools, good roads, good investments and bring it now," Abrams said.

The last three days of the legislative session are scheduled for April 11, 12 and 14.


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