ATLANTA — A state legislative committee is eyeing cutbacks in $30 billion worth of tax credits and tax exemptions to offset the potential elimination of an income tax that generates $16 billion for state government.
“It is not a question of if we go to zero, it’s when and how we take our income tax to zero,” said Sen. Blake Tillery, R-Vidalia, leader of the Special Committee on Eliminating Georgia’s Income Tax. “It’s an issue of competitiveness.”
Senators heard Monday from three invited speakers who advocated for eliminating the 5.19% income tax.
Patrice Onwuka, director of the Independent Women’s Center for Economic Opportunity, said half of the state’s residents live paycheck to paycheck and could use a tax break.
Arthur Laffer described consequences for population, productivity and tax revenue in states that adopted an income tax, and he pointed to gains in states that eliminated their income tax, including his home state of Tennessee.
He said it’s “really cool” not having to file an income tax return and that it is a form of taxation that undermines economies.
“The income tax is the single biggest major tax killer of growth,” said Laffer, a retired professor who advised President Ronald Reagan on economic policy and is associated with “supply-side” economics theory.
Sen. Nan Orrock, D-Atlanta, noted that Georgia already has a thriving economy and that many of the states that eliminated their income tax subsequently raised their sales tax rate.
Economists have long held that a sales tax is more painful for low-income people than an income tax, and Orrock said retirees would be among those disproportionately affected.
But Tillery, who chairs the Senate Appropriations Committee and is running for lieutenant governor, had delivered to the other senators more than 200 pages of documents detailing $30 billion in tax credits and tax exemptions in Georgia law. He said those could be eliminated to make up revenue lost by eliminating the income tax, instead of raising the sales tax rate.
The final speaker, Kyle Wingfield, president and CEO of the fiscally conservative Georgia Public Policy Foundation, offered two policy approaches to accompany income tax cuts.
First, Georgia could place some of its billions in reserves into an emergency fund to hedge against unexpected budget shortfalls. Second, lawmakers could set “revenue triggers” that would only allow income tax cuts if overall tax revenue grew.
This story is available through a news partnership with Capitol Beat, an initiative of the Georgia Press Educational Foundation.
