With the U.S. economy's inflation rate currently bordering on 8 percent, a 50-year high, you don't need me to tell you that either your wallet is shrinking, or that the purchasing power of yesterday's U.S. dollar is starting to feel a bit more like the Argentine Peso... Say it isn't so.
Thankfully, the Georgia economy is largely back to humming, and though we are experiencing record employment, several sectors remain quite challenged to find a ready and able workforce. This tight job market is driving up wages, but not fast enough to keep pace with inflation. Whether facing sticker shock at the gas pump or on the grocery shelf, consumers are feeling battered.
Like it or not, U.S. Presidents and the party in power receive disproportionate credit as well as disproportionate blame in regard to the state of the economy and particularly during times of radical price spikes. At the present time, and on the national level, that party is the Democrats.
Smart politicians are looking for ways to create some relief. Georgia's Governor Brian Kemp proposed suspending the collection of Georgia's 29.7 cents per gallon motor fuels excise tax. Georgia's General Assembly quickly agreed, and passed legislation, pausing the collection of the tax through the end of May 2022. Governor Kemp signed that tax freeze into law, with prices already dropping at the pumps, through the upcoming heavy drive-time Memorial Day holiday weekend, as well as the Georgia General Primary Election on Tuesday, May 24th.
Meanwhile, the General Assembly also revisited and simplified Georgia's income tax code. Several statewide GOP candidates are calling for the elimination of the Georgia income tax, which currently produces nearly 60 percent of the state's annual revenue. Instead, GOP legislative leaders and realists returned to a more rational and incremental approach of flattening tax rates, ending the majority of tax deductions (maintaining the charitable and education/retirement savings deductions), while also raising the income tax rate exemption to $30,000 per year before a family of four pays ANY state income tax.
This GOP cut of $1-billion in income tax collections is being touted as the largest tax cut in state history; and will take effect in January of 2024. The tax rate will drop from the current 5.75 percent, eventually down to 4.99 percent, with annual incremental decreases over the next several tax years. The end result is that almost every Georgian will be paying less in income taxes, as well as dealing with a simpler tax code. Only corporations will not be receiving an income tax cut.
In 2018, the General Assembly reduced Georgia's top income tax rate from 6% to 5.75%. The GOP leadership then planned a decrease to 5.5% in 2020, at an estimated cost of $500-million in revenue, but the economic shutdowns brought on by the pandemic put that plan on hold. Then in 2021, the General Assembly raised the income tax exemption level, forgoing $140-million in revenue, during a time when incomes and the economy were on the rebound, but still behind pre-pandemic levels.
Georgia tax revenue collections are now running 16 percent of where they were PRIOR to the pandemic, so along with the two-month pause in the gas tax (which won't break the state's road bank), these tax cuts taking effect in just over a year should not require any significant spending cuts.
The Georgia Senate also considered reducing or eliminating the substantial tax credits available to motion picture film and television production industries here in Georgia, which have helped make the state the Hollywood of the South. For most of the past decade, only California and Canada have been able to keep pace with the Peach state in this job-creating industry. Again acting as the voice of reason, Georgia House Speaker David Ralston indicated he was unwilling to sunset tax credits which have proven so beneficial to the state’s image as well as its economy.
There are no silver bullets in state and local government funding anymore, both are required to manage their revenues to match their expenses, by charter and state constitution. But during an election season, and a spiking cost environment, cutting taxes or returning taxpayer money to their pockets is $imply $mart politic$.
