• Commentary

Two Pro-Growth Tax Reform Plans Introduced



Two tax reform bills to lower Georgia’s income tax rate were introduced last week, but it is uncertain if any action will be taken this year.

Two tax reform bills to lower Georgia’s income tax rate were introduced last week, but it is uncertain if any action will be taken this year.

House Bill 435, sponsored by Reps. B.J. Pak and Brett Harrell, would broaden the personal income tax base by limiting itemized deductions and reduce the tax rate from 6 percent to 5.25 percent. Non-itemizers (66 percent of Georgia filers) would see no change in their deductions or taxable income, but would benefit from the rate reduction. Itemized deductions would be limited to charitable contributions (with no limit) and mortgage interest of up to $20,000. According to Bankrate.com, a new 30-year, $440,000 mortgage at a fixed 4.5 percent interest rate would have annual interest payments of less than $20,000.

According to Georgia State University analysis, under this plan the personal income tax rate could be reduced to 5.25 percent with no loss of revenue. The limits on itemized deductions are similar to those in North Carolina’s recent tax reform package that reduced personal income tax rates from 7.75 percent to 5.75 percent.

House Bill 445, sponsored by Rep. John Carson, would reduce the personal and corporate income tax rates from 6 percent to 4 percent over time. The bill has several components:

  • The sales tax base is broadened by taxing groceries, digital goods and cable and satellite TV
  • The sales tax rate increases from 4 percent to 5 percent
  • Cigarette taxes increase from 37 cents a pack to 65 cents a pack
  • A number of tax credits are eliminated

The bill is designed to be revenue neutral, but the fiscal note is not yet available.

Most of these recommendations are similar to the recommendations in the final report of the 2010 Special Council on Tax Reform and Fairness for Georgians, but don’t go as far. The Tax Council recommended eliminating all itemized deductions, the standard deducation, dependent exemptions and the retirement income exclusion to broaden the income tax base. The Council also recommended broadening the sales tax base to include services taxed in 25 or more states and eliminating the state’s sales tax holiday.

For more information:

– Tax Reform chapter of our Guide to the Issues

– The Economics and Politics of Tax Reform

Two tax reform bills to lower Georgia’s income tax rate were introduced last week, but it is uncertain if any action will be taken this year.

House Bill 435, sponsored by Reps. B.J. Pak and Brett Harrell, would broaden the personal income tax base by limiting itemized deductions and reduce the tax rate from 6 percent to 5.25 percent. Non-itemizers (66 percent of Georgia filers) would see no change in their deductions or taxable income, but would benefit from the rate reduction. Itemized deductions would be limited to charitable contributions (with no limit) and mortgage interest of up to $20,000. According to Bankrate.com, a new 30-year, $440,000 mortgage at a fixed 4.5 percent interest rate would have annual interest payments of less than $20,000.

According to Georgia State University analysis, under this plan the personal income tax rate could be reduced to 5.25 percent with no loss of revenue. The limits on itemized deductions are similar to those in North Carolina’s recent tax reform package that reduced personal income tax rates from 7.75 percent to 5.75 percent.

House Bill 445, sponsored by Rep. John Carson, would reduce the personal and corporate income tax rates from 6 percent to 4 percent over time. The bill has several components:

  • The sales tax base is broadened by taxing groceries, digital goods and cable and satellite TV
  • The sales tax rate increases from 4 percent to 5 percent
  • Cigarette taxes increase from 37 cents a pack to 65 cents a pack
  • A number of tax credits are eliminated

The bill is designed to be revenue neutral, but the fiscal note is not yet available.

Most of these recommendations are similar to the recommendations in the final report of the 2010 Special Council on Tax Reform and Fairness for Georgians, but don’t go as far. The Tax Council recommended eliminating all itemized deductions, the standard deducation, dependent exemptions and the retirement income exclusion to broaden the income tax base. The Council also recommended broadening the sales tax base to include services taxed in 25 or more states and eliminating the state’s sales tax holiday.

For more information:

– Tax Reform chapter of our Guide to the Issues

– The Economics and Politics of Tax Reform