Georgia unveils plan to eliminate income tax by 2032

ATLANTA (CN) — A Georgia Senate special committee formed last summer to study ways to eliminate the state’s income tax unveiled its plan to do so by 2032 on Wednesday.

While the plan still requires legislative approval to take effect, its recommendation passed the committee by a 6-3 vote, with all Republican members voting in favor and the Democrat minority voting against it.

Under the proposal outlined by State Senate Appropriations Chair Blake Tillery, state income taxes would be eliminated entirely for about two-thirds of Georgia workers beginning in 2027 and sharply reduced for all other taxpayers.

The Republican said the first $50,000 of income for individual filers would be tax-free. Meanwhile, married couples filing jointly would pay no state income tax on their first $100,000 of income.

For the remaining taxpayers and businesses, state income taxes would gradually lower and eventually disappear over an estimated six-year period.

“Right now, Georgia families are feeling the burden of affordability,” Tillery said.

“I know that it’s not a plan that everyone loves, but it is a plan that gives benefits first to hardworking families and a plan that gives benefits to every working family here in Georgia,” he added.

While Tillery said the plan would put about $5,000 back to a family making $100,000 or less annually, Democratic state Senator Nan Orrock expressed concerns over the estimated billions in relief the state’s top 26% of earners would eventually receive over time.

She also stressed that the resulting reduction in state funds would prompt devastating cuts to needed public services, particularly in rural areas.

Income taxes are by far the largest source of state revenue, accounting for about $15.7 billion this past year.

“We have a homelessness issue, we have mental health needs, we have education needs. We’re not fully staffing our agencies,” Orrock said.

“We need more robust funding in these areas. It doesn’t address the very real budget needs that we have and that are going to increase when these cuts come from Washington,” she added.

Just last month, the leader of the state agency that oversees Georgia’s foster care system told legislators it will struggle to cope with a projected $85 million deficit in fiscal year 2026, forcing cuts to parental assistance, transportation, treatment and other services.

Tillery said the plan to achieve zero income tax would cost the state about $3 billion each year. The funding would mostly stem from the state’s anticipated budget surplus, which he said was nearly $2 billion last year.

Last year, the Legislature allocated $1 billion from that surplus to rebate eligible Georgia taxpayers a one-time refund of up to $500.

The remaining funds needed for the plan would be created by moving state spending from cash to bonds, Tillery said.

In its second year, he said lawmakers would start trimming back 10% of special interest tax credits, which total about $30 billion.

Republican state Senator Larry Walker rebutted the Democrats’ concerns by arguing conservative fiscal adjustments can sustain the cuts.

“Georgia has a long history of conservative budgeting. We were able to weather Covid in a strong fashion. We will continue to be fiscally conservative in our budgeting and tax policies,” Walker said.

“We are keenly aware that every dollar we take in is coming out of a Georgian’s pocket that they work for. We don’t take that lightly. Going forward, we don’t know what six years down the road is going to look like, but we do know this is something we can do right now for people who are struggling to meet ends meet,” he added.

Republican state Senator Greg Dolezal emphasized that the plan does not include increases in state sales tax or property taxes.

However, property tax bills have already seen recent increases across the state due to rising property values and local governments setting high millage rates to fund county services.

Property taxes for single-family homes in metro Atlanta increased by more than 15% from 2022 to 2023, according to data.

Tillery said the committee heard testimony from police officers and health care workers who moved from Georgia to neighboring states Tennessee and Florida because they do not collect personal income taxes.

Florida has a low overall tax burden, but Tennessee charges one of the highest combined sales tax rates in the country to make up for the lost revenue. Still, the state’s total tax burden is 6.4%, one of the lowest in the nation.

There are seven other states that do not levy a broad personal income tax, including, Alaska, Nevada, New Hampshire, South Dakota, Texas, Washington and Wyoming.

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