Judson Hill Proposes Income Tax Changes

Senate Finance Chairman Judson Hill has dropped two measures affecting taxation. One, SB 280, would modify tax rates and exemptions for personal income taxes and eliminate the corporate net worth tax, and the other, SR 756, is a proposed constitutional amendment that, if approved, would automatically lower personal tax rates by up to five percent depending on the growth of state revenues and reserves.

SB 280 would, beginning in 2017, reduce the income tax rate from 6% to a 5.4% rate that would be flat for all levels of income. The measure also eliminates itemized deductions except for mortgage interest up to $25,000, charitable contributions, and medical expenses. The standard deduction would be raised from $7,400 to $11,400 for married taxpayers filing jointly and $2,700 to $4,700 for single taxpayers. The dependent deduction would be raised from $3,000 to $5,000.

The constitutional amendment, if passed, would mandate a decrease in the top personal income tax rate of two tenths of a percent if, beginning in 2017, state revenues exceeded $23 billion and the state reserve fund exceeded 7% of revenues, or at least $1.61 billion. In following years, revenues would have to be greater than $23.6 billion and the reserve fund would have to be greater than 7% of revenues, or at least $1.65 billion. As long as revenues continue to exceed $23.6 billion and the reserve fund is at the appropriate level, the tax rate could continue to decrease at .02% increments until the rate reached 5 percent.

Hill’s proposals are likely a response to the lack of action on a provision inside House Bill 170. Senators, leery about passing a tax increase to fund transportation, inserted a provision calling for a Joint Committee on Georgia Revenue Structure that would examine the state’s tax system, and introduce a bill in the House that could only be voted up or down. While Lt. Governor Casey Cagle appointed the Senate members of the committee, including Sen. Hill, the House failed to make its appointments, and the committee never met.

While Senator Hill’s proposals may make headway in the Senate, the prospect of action in the House is slim. Constitutionally, revenue bills are required to start in the House, which takes that responsibility seriously.

Note: This post has been updated to clarify the tax rate could decrease to 5%, rather than decreasing by .5%