State Income Tax – The Peach State Works to Level the Playing Field
Throughout America, the competition is heating up between states to attract more business, wealth, and jobs from outside of their borders. As some states continue to increase the tax burdens on their populace in order to cover their burgeoning budgetary obligations, others are waiting with open arms for those who have gotten fed up, packed up all of their physical and fiscal possessions, and headed for places where they can plant new roots – and keep more of their own hard-earned money. Between 1995 and 2010, these migrating Americans brought over $ 2 trillion along with them. As some state economies further deteriorate, this migration to more favorable tax environments will certainly continue.
The state of Georgia is actually one of those fortunate states that has been on the winning side of this equation. The Peach State realized an inbound adjusted gross income gain of $12.4 billion during that same 1995 to 2010 time frame. But Georgia’s gains pale in comparison to neighboring Florida’s staggering $86.4 billion. One main difference, beyond the attraction of the sunshine and 75 degree winters, is that Florida has zero state income tax. Today some Georgia legislators want to emulate that model, and get an even bigger piece of the pie.
Looking towards competing head-to-head with Florida (as well as another no-state-income-tax neighbor to the north, Tennessee), State Senator Mike Dugan, R-Carrollton, is co-sponsoring a bill to amend the state constitution to gradually phase out Georgia’s income tax. Sen. Joshua McKoon, R-Columbus, has proposed Senate Resolution 8 (SR 8), which would phase out Georgia’s state income tax completely by 2027. This would be done by reducing the income tax rate by .05 percent each year. The proposal now resides in the Georgia Senate Finance Committee, where it is under consideration.
Georgia is not alone in its efforts. Nine governors, from states including Louisiana, North Carolina and Nebraska, are currently working on ways to eliminate their state income taxes as well. Their motives are not only to attract new business, but also to slow outward migration to surrounding states due to their own current tax burdens.
This idea of reducing or eliminating Georgia’s state income tax is certainly not without its detractors, including Governor Nathan Dean. When you consider that 48% of the state’s revenues are derived directly from the state income tax, eliminating it will force the state to look for alternative sources of income. Florida can count on its tourism industry. Alaska, with its darkness and -75 degree winter temperatures, also has no state income tax, but it does have energy revenues. Since a giant pecan pie bake sale won’t raise enough money, Georgia would have no choice but to gradually increase consumption taxes such as sales tax, and raise property taxes. Both of these options would potentially weigh heavily on lower income Georgians.
Amendments to the Georgia Constitution may be introduced in either the House of Representatives or the Senate. An amendment must be approved by a two-thirds majority of each legislative chamber in order for it to be placed on the ballot for voter approval. If SR 8 gets the approvals it needs from the House and Senate and makes it to the ballot next year, it will then be up to the voters to look at both sides of the issue and weigh the pros and cons. Georgians will then cast their votes for what they think will be best for their state.