Georgians could be getting a small tax cut if the General Assembly votes to pass a bill sponsored by the chairman of the House Ways and Means Committee. We encourage passage.
The measure, House Bill 329 by Rep. Jay Powell, R-Camilla, creates a flat tax for Georgia with a top rate slightly lower than the current maximum. Conservatives have long advocated for a flat tax at the federal level, and this state initiative can serve as an example to Congress.
It is pro-growth, simplifies Georgia’s tax system and erases North Carolina’s competitive advantage by matching their top rate.
Powell’s proposal trims the upper rate from 6 percent to 5.4. Economists estimate that would save taxpayers a total of $154 million yearly. It’s unlikely to severely cripple state spending on a $21 billion budget when the improving economy is raising tax revenues many times that anyway.
Powell also eliminates the state’s other tax brackets so that everyone’s marginal tax rate is the same. That’s the essence of the flat-tax philosophy which seeks to more fairly distribute the burden of paying for government services rather than penalizing the most productive earners.
To keep from giving a moderate tax cut to the highest-income Georgians at the same time as a tax increase for the low-income earners who are currently in the 1-5 percent tax brackets, Powell borrows an idea from President Richard Nixon to create an earned-income tax credit. The left-leaning Georgia Budget and Policy Institute, an Atlanta think tank, has long advocated for an earned-income credit as a way to shield the poor from crushing taxation.
Unlike the federal credit, Powell’s could only be applied against taxes owed. The federal version includes “refunds” in the form of checks to people who have credits left over after applying them to what they owe. Those checks are essentially another form of welfare payments, and Powell doesn’t want the state getting into that business.
The flat tax with limited credit makes a good combination, according to Kelly McCutchen, president of the right-leaning Georgia Public Policy Foundation.
“An almost universally held principle of good tax reform is the goal of broadening the tax base and lowering tax rates,” he said. “This bill does both.”