ATLANTA ( Associated Press) — Georgia senators are favoring a more gradual income tax cut that would start less than the one proposed by the House, but could eventually be twice as large.
The Senate on Friday voted 51-4 in favor of its version of House Bill 1437, which would gradually create a flat state income tax of 4.99% in 2032 or later. This compares to today’s income tax for the graduated bracket and a top rate of 5.75%.
The measure goes back to the House, which wants to create a flat 5.25% rate in 2024, leaving only until the end of the session on Monday, a key priority of Republican House Speaker David Ralston of Blue Ridge to iron out differences.
The House plan would cost about $1 billion, while Senate Finance Committee Chairman Chuck Huffstetler, a Rome Republican, said his plan could ultimately cut tax collections by more than $2 billion. But Huffsetler said he thought the immediate impact of the House plan on the state’s $30 billion tax collection would be too severe.
“I don’t think the revenue is more than a billion dollars for their proposal to do it all at once,” Huffsetler said.
Democrats oppose both plans, saying a flat tax is regressive and that too many benefits flow to the richest Georgians. He says that due to low tax collection, the ability of the state to deliver services will be affected. Both the House and Senate resolutions attempted to offset the hit of rate hikes on the lowest-income filers, but an analysis by a liberal-leaning group found that higher-income earners make the most of the benefits under the House plan. .
The vote came on Thursday after the Senate Rules Committee attempted to ease tax breaks for film and television production, which has been credited with turning the state into one of the world’s largest filming centers. The move would have increased the film tax credits to $900 million annually and prevented companies from selling them to others.
It was estimated that tax collections would increase by $500 million per year by 2027. Without the savings, Huffsetler’s approach becomes too costly.
Huffstetler’s plan will create a flat rate of 4.99%, starting in 2024, with married couples making less than $20,000 a year and single people making less than $13,000 a year. The top all-rate rate will drop slightly to 5.7% in 2024 from the current 5.75%. Most people will notice the changes when filing their taxes in 2025.
The rate of 4.99% will move up the income ladder in nine steps. But the tax deduction will stop in any year in which the state’s revenue does not increase by 3%, in any year the revenue is less than in any of the previous five years, or in any year the state does not have more money than tax in its savings account. Deduction will cost.
The House and Senate also disagree on the cuts, with the Senate leaving existing rules to put in place while the House seeks to eliminate many of the cuts. Huffsetler said the House plan would increase taxes on 500,000 filers, mostly middle- and high-income earners who just cut the deduction.
“He had some winners and losers and up to half a million people were going to pay more taxes, even at the $150,000, $200,000 level,” Huffsetler said.
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