The Republican-led state Senate adopted an historic income tax cut plan Thursday that Democrats decried as an election year ploy that would undermine the state budget.
There was no official estimate of the cost of Senate Bill 476, which calls for no income tax on the first $50,000 in annual earnings by an individual and $100,000 for a married couple.
The absence of an official analysis of the impact to the more than $40 billion budget led Democrats to assert the plan would cost $9 billion while Republicans touted it as a boon for working people.
“It would represent the largest tax cut in state history,” Lt. Gov. Burt Jones, a Republican, said after the measure passed 32-18, with all Republicans in favor and nearly all Democrats opposed.
Sen. Blake Tillery, R-Vidalia, the lead co-sponsor of the legislation, said it would help firefighters, teachers, restaurant employees and middle-class workers in general, ridiculing Democrats’ arguments against it.
“The mental gymnastics you have to jump through to vote against this bill are astounding,” he said.
Democrats said the wealthy would benefit more, since the bill would also reduce the base income tax rate to 4.99% from the current 5.19%. They said it would result in budget shortfalls in the long run, forcing budget cuts and sales tax increases that would drive up prices for groceries, child care and other expenses that are making life difficult for many Georgians.
They called the measure a trick to mislead voters.
Several Senate Republicans are running for higher office, including Jones, who wants to succeed Brian Kemp in the governor’s office, and Tillery, who hopes to follow Jones as lieutenant governor.
Sen. Kim Jackson, D-Stone Mountain, called the bill “a scam.” Sen. Derek Mallow, D-Savannah, said it was “robbing Peter to pay Paul.”
Sen. Nikki Merritt, D-Grayson, said it would “devastate” the economy. “It’s not a plan for working families,” she said. “It’s a plan working families will pay for.”
Kemp’s own budget proposal would reduce the income tax rate to 4.99%, but it does not include increases in the standard deduction for income.
That led Sen. Josh McLaurin, D-Sandy Springs, also running for lieutenant governor, to say SB 476 was a “senseless tax cut that Brian Kemp’s going to veto on sight … this is election year stuff.”
McLaurin said reducing the base rate to 4.99% would cost $3 billion a year while deducting the first $50,000 thousand in income per tax filer (and $100,000 per couple) would cost $6 billion.
Tillery had a much lower estimate, less than $3 billion for the package, which he said would be balanced by cuts to tax credits and exemptions that collectively cost the state treasury about $30 billion.
SB 476 would eliminate them initially for a variety of recipients, including business headquarters, banks, medical manufacturers, telecommunications facilities, boat repairers, crab fishermen and for low- and zero-emission vehicles and electric vehicle chargers.
It would end new exemptions for the manufacture of machinery to reduce or eliminate air or water pollution and for high-technology companies. There would also be no new exemptions for data centers.
Then, all tax credits and exemptions would end in 2032.
The plan had Republicans gloating that they had seized the issue of affordability from Democrats.
“There’s a reason, y’all, why the Republican Party is becoming the party of the working class,” said Sen. Greg Dolezal, R-Cumming, who is running for lieutenant governor. Sen. Bill Cowsert, R-Athens, who wants to be Georgia’s next attorney general, said Democrats used to be the party of the working class while Republicans represented the wealthy.
“That narrative is completely flipped now,” he said.
The Republican-led Senate also passed a backup plan in Senate Bill 477, which Tillery acknowledged was not as beneficial for the middle class. It would also reduce the base income tax rate to 4.99%, then continue dropping it until it reached 3.99% in 2028. It would increase tax deductions by a much smaller amount, raising the untaxed portion of income by a third, to $16,000 for individuals and to $32,000 for married couples. The state tax on corporate income would drop to 4.99% but no further.
Both bills would need consent from the House to become law. So, the Senate extended what Tillery described as an “olive branch” to that chamber by gutting two House bills and replacing them with the language in the two Senate bills, so the House could claim credit.
Meanwhile, House Republicans have their own tax priority. They are targeting local property tax relief as their answer to affordability.