A state senate committee tasked with eliminating Georgia’s state income tax held its third meeting in a unique location on Tuesday.
To hear from everyday people in an everyday setting, the committee decided to have their meeting inside of Longstreet Cafe in Gainesville.
The Georgia Senate Special Committee on Eliminating Georgia’s Income Tax was created by Lieutenant Governor Burt Jones in July. They held their first two meeting in August and September at the State Capitol building.
Inside of a bustling Longstreet Cafe at peak lunchtime hours, senators heard from a retired firefighter, a working mom, local business owner Ben Filchak, a candidate for governor and Gainesville Police Chief Jay Parrish.
“This would give Georgia families just a little more breathing room,” former Gainesville firefighter Riley Shoemake said.
Parrish said that the presence of a state income tax affects recruiting because of nearby Tennessee and Florida.
Carly, a working mom, quizzed the senators on the cost of child care, noting a sharp increase in basic necessities and how important a few extra dollars would be at the end of each month.
“It can mean the difference in saving for our kids’ future and something else,” she said.
Democrat State Senator Nan Orrock from District 36 in Atlanta posited the idea of fully-funded daycares funded with tax dollars.
For now, it is unclear how the state plans to eliminate income tax since the bill has not been drafted yet. That’s the purpose of the committee and its meetings.
What the senators are saying
Republican State Senator for District 19 in Vidalia Blake Tillery, who is also running for Lieutenant Governor and is the chairman of the committee, said he was focused on bringing down corporate tax breaks to offset the cost.
“We hand out in corporate welfare, tax credits, and tax exemptions about $30-billion-plus,” Tillery said. “I went to the University of Georgia, but you don’t have to go to Georgia Tech to do that math.”
Democrat State Senator for District 33 in Marietta Michael ‘Doc’ Rhett said he wanted to see caution in bringing back the income tax.
“I understand the purpose and intention, but what I would like to make sure is that the amount of funding we’re going to let go is the same amount we’re going to receive,” Rhett said. “When I was in the Air Force, I had the flight engineer. He would monitor to see that the same amount of air that was going into the engine was the same amount going out.”
Rhett also said for now, it is unclear which programs the state will have to pick up due to the uncertainty in the federal government’s cuts.
Republican State Senator for District 27 covering Forsyth County and Alpharetta and Lieutenant Governor candidate Greg Dolezal said they have not yet discussed sales taxes.
“We have not discussed sales tax other than just broadly so far,” Dolezal said. “Keep in mind people who don’t live here pay them as well when they travel here … What we have said as a committee is we need to go to zero, and what’s the best path to get to zero.”
Georgia tax quick facts
Georgia currently has a 5.19% flat income tax rate, with a plan to go down to 4.99% by 2028.
That flat rate ranks 22nd among all states, 2nd in the southeast and 3rd highest of states with a flat rate.
That tax makes up roughly $20-billion of the state’s revenue, or roughly half.
Sales tax makes up around $10-billion and makes up about 25% of the state’s revenue, and would need to be tripled if income tax is done away with without something else to supplement that lost revenue.
Georgia’s average sales tax rate is 7.44%, 19th highest in the country, although the state only collects 4% of that in statewide sales taxes.
Common plans to reduce taxes include reducing spending. Georgia ranks 41st in spending per capita, a generally lean state with little excess to cut.
Two states commonly mentioned by the state senators as a frame of reference were Florida and Tennessee. Neither have state income taxes.
There are nine states in total without income taxes. Tennessee never had a broad-based income tax, while Florida repealed theirs over 100 years ago.
The last state to repeal their income tax was Alaska in 1980, although they fell back on their oil reserves to make up the difference.
To Tillery’s previous point, the state estimated it would forgo $10-billion in revenue in fiscal year 2022 due to state tax breaks.
How states that do not have income taxes make up the difference
As mentioned above, Alaska fell back on their oil reserves. How about the other states?
Tennessee has the 2nd-highest average sales tax at 9.61% to make up the difference, while Florida relies on their robust tourism industry.
It is unclear how Georgia plans to make up the difference. A sales tax increase, although paid for by tourists and non-residents as well, is considered regressive.
Lower-income households spend a greater share of their income in retail settings due to making less money to begin with and having less money in capital investments. A hike in a sales tax disproportionately affects lower-income households, while an income tax is considered more progressive.
Another meeting is planned for next month, and Tillery said he wants a more concrete idea of what a bill would look like from his fellow senators.
“We’re just looking at evening out the playing field for everyone, so that the person who’s able to hire a lobbyist at the Capitol stands in the same position as the person who’s not able to hire a lobbyist,” Tillery said.
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