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Thursday August 11th, 2022 1:31AM

Georgia Senate seeks gradual tax cut, ditches film tax limit

By The Associated Press

ATLANTA (AP) — Georgia senators are favoring a more gradual income tax cut that would start smaller than one proposed by the House, but eventually could be twice as big.

The Senate voted 51-4 on Friday in favor of its version of House Bill 1437, which would gradually create a flat state income tax of 4.99% by 2032 or later. That compares to today's income tax with graduated brackets 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 to work out differences on what's been a major priority of Republican House Speaker David Ralston of Blue Ridge.

The House plan would cost about $1 billion, while Senate Finance Committee Chairman Chuck Hufstetler, a Rome Republican, said his plan could eventually cut tax collections by more than $2 billion. But Hufstetler said he thought the immediate impact of the House plan on the state's $30 billion in tax collections would be too severe.

“I don’t think the revenue is necessarily there for their proposal, over a billion dollars, to do it all at once,” Hufstetler said.

Democrats oppose both plans, saying a flat tax is regressive and too much benefit flows to the richest Georgians. They say that lowering tax collections will hurt the state's ability to provide services. Both the House and Senate proposals try to offset the hit of raising rates on the lowest-income filers, but an analysis by a liberal-leaning group has found that high-income earners make most of the gains under the House plan.

The vote came after the Senate Rules Committee on Thursday stripped out an attempt to reduce tax breaks for film and television production that have been credited with transforming the state into one of the world’s biggest filming hubs. The move would have capped film tax credits at $900 million a year and barred companies from selling them to others.

That was projected to increase tax collections by $500 million a year by 2027. Without the savings, Hufstetler's approach becomes much more expensive.

Hufstetler’s plan would create a flat rate of 4.99% in steps, starting in 2024 with married couples making less than $20,000 a year and single people making less than $13,000 a year. Everyone’s top rate would fall slightly to 5.7% in 2024 from the current 5.75%. Most people would notice the changes when they filed their taxes in 2025.

The 4.99% rate would rise up the income ladder in nine steps. But tax cuts would pause any year in which state revenue doesn’t grow 3%, any year that revenue is lower than any of the five previous years, or any year the state doesn’t have more money in its savings account than the tax cut would cost.

The House and Senate also disagree on deductions, with the Senate leaving the current rules for itemizing in place, while the House seeks to eliminate many deductions. Hufstetler said the House plan would increase taxes on as many as 500,000 filers, mostly middle and upper income people who itemize deductions right now.

“They made some winners and losers and up to a half a million people were going to pay more taxes, even at the $150,000, $200,000 level," Hufstetler said.

___

Follow Jeff Amy on Twitter at http://twitter.com/jeffamy.

  • Associated Categories: Associated Press (AP), AP Online Headlines - Washington, AP Online Congress News, AP Entertainment, AP Online Movies News, AP Business, AP Online - Georgia News, AP Online Headlines - Georgia News
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