Georgia House Passes Single-Rate Income Tax Bill
On Wednesday, the Georgia House of Representatives voted overwhelmingly to adopt legislation converting the state’s current graduated-rate individual income tax into a single-rate tax. Currently, Georgia imposes six tax rates, maxing out at 6 percent above $7,000 in taxable income—which of course means that nearly all working Georgians have at least some of their income subject to the top marginal tax rate. The legislation which cleared the House, HB 329, replaces the six brackets and rates with a single 5.4 percent rate, with an earned income tax credit designed to retain or even enhance tax code progressivity for many low- and middle-income Georgians.
Last year, the Senate passed similar legislation that also lowered the income tax to a flat 5.4 percent, though that legislation failed to pass the House. Because last year’s tax reform package was a so-called “strike-all” amendment to an orphaned House bill, it complied with the constitution’s origination clause, which requires revenue measures to originate in the lower chamber. However, members of the House may have felt that it violated the spirit, if not the letter, of the provision, and considering the proposal so late in session may have further complicated its chances. Given the success of that measure in the Senate, though, there is reason to believe that HB 329 might be favorably received there. Should it land on Governor Nathan Deal’s desk this year, its fate is uncertain.
Georgia public officials are rightly zealous in the defense of the state’s AAA bond rating. The state is one of only nine to earn the highest grade from all three major ratings agencies, and there has long been concern about “rocking the boat.” Among the other eight states with across-the-board AAA ratings, though, are North Carolina, which adopted comprehensive tax reform in 2013; Utah, which overhauled its tax code in 2006; Texas, which foregoes both individual and corporate income taxes; and Tennessee, which foregoes a wage income tax and has begun phasing out its tax on interest and dividend income.
Ratings agencies emphasize stable revenue streams, conservative fiscal management, positive fund balances, competitive regulatory environments, moderate debt burdens, and economic diversity—and responsible tax reform can often be part of that equation.
Published at Fri, 03 Mar 2017 18:49:37 +0000