Another Missed Opportunity to Cut Income Taxes in Georgia
For the past two years, Georgia lawmakers have repeatedly discussed reducing or eliminating the state’s income tax. With tax reform sweeping the nation in 2013 and carrying over into 2014, this appeared to be the year the Peach State finally passed tax reform legislation. After two months and six days, the 2014 legislature adjourned after managing only to produce a constitutional amendment for the November ballot that would do nothing more than prevent tax hikes.
The Income Tax Rate Cap Amendment, which was narrowly approved by the Senate, would prohibit the state from increasing the maximum state income rate above that in effect on January 1, 2015: 6 percent. While this amendment – if approved by voters this November – would take tax hikes off the table for the foreseeable future, it remains a passive step towards enacting true tax reform in a region with two no-income-tax states.
Within the Southeast, Georgia has the second-highest income tax rate (at 6 percent) for residents earning over $7,000 per year. It used the be third-highest until North Carolina Governor Pat McCrory reduced the 7.75 percent top marginal rate to a flat 5.8 percent, a rate 0.2 percent lower than that Peach State’s highest rate. Rather than listening to the 84 percent of residents who favored eliminating or reducing Georgia’s income tax rate (as noted in a poll by the Atlanta Business Chronicle), lawmakers balked at the chance to improve the Peach State’s business climate and reduce Georgians’ overall tax burden.
Despite being named the best state for business by Site Selection magazine in 2013, it’s Georgia’s neighbor to the south that is seeing the most significant relocation of wealth and people.
Even though Georgia experienced a net gain of $15.77 billion in adjusted gross income from 1992 to 2010, Florida’s net gain of AGI – over the same time period – was $95.61 billion, or nearly 6.4 times greater than Georgia’s. While several factors can be attributed to this massive influx in working wealth migration, it can be argued that Florida’s lack of a state income tax plays a major role. If it didn’t, then why did Hertz relocate its corporate office to the city of Estero in Southwest Florida over Atlanta? It is an indisputable fact that one’s lifetime earning potential is significantly higher in Florida than it is in Georgia. According to www.savetaxesbymoving.com, a single 35-year-old software developer with no dependents, making $86,880 (Bureau of Labor Statistics) and moving from Atlanta, GA to Jacksonville, FL, will earn an additional $400,000 during his or her career assuming he or she retires at the age of 65. That’s just one of millions of examples of people leaving the Peach State for the Sunshine State.
While the opportunity to reduce Georgia’s income tax in 2014 has passed, lawmakers can still pick up the mantle of tax reform in 2015. Wisconsin, Kansas and North Carolina have demonstrated over the past three years that economies can experience growth when residents are able to keep more of their hard-earned wealth and businesses are able to operate with less regulations. Perhaps Georgia will cease toying with the idea of tax reform and finally choose to lessen the tax burden for all Georgians. By keeping the top marginal income tax rate the second-highest in the region and twentieth-highest in the nation, Georgia will see more people stopping for peaches and UGA football games on their way out of the state – to Florida, North Carolina, and Tennessee – rather than in.