Georgia Income Tax Decrease
How do you feel about keeping a little bit of extra money in your pocket each year? Well, if you like that idea, then, you will like Bill HB 918.
HB 918 was introduced earlier this year with the intent of reducing tax rates for wage earners in the Peach State. The bill gradually reduces the top individual and corporate income tax rate down from 6 percent to 5.5 percent by 2020. Standard deductions will also double for all taxpayers, up to $4,600 for single filers, $3,000 for married filing separately, and $6,000 for joint filers.
Why the big change? Well, our neighbor to the South has a lot to offer beyond Disney World. Florida is the second fastest growing state in the nation and offers a whopping 0% income tax rate. For most American families, that is the difference between paying your cell phone bill and being late. Georgia is surrounded by states with low or no individual income tax burdens, and this change will help boost the state’s competitiveness.
Tennessee only taxes interest and dividend income at a rate of 3 percent. With North Carolina levying a rate of 5.499 percent and Alabama at 5 percent, the only neighboring state with a higher income tax rate than Georgia is South Carolina at 7 percent.
What is most misleading is that only those in the highest tax bracket pay the 6% income tax rate. The highest tax bracket starts at $7,000.00!
Lowering the individual income tax rate not only provides relief for individual taxpayers in Georgia, but for businesses, too. Many businesses pay individual income taxes. These businesses, including sole proprietorships, partnerships, and S corporations, are structured as pass-through businesses, and pay taxes through the individual income tax code, not the corporate income tax. Lowering the rate would benefit both individual taxpayers and businesses in the state.
The reduction of the corporate income tax rate from 6 percent to 5.5 percent will also help the state compete for corporate investment. Florida, South Carolina, and North Carolina all levy a lower rate than Georgia, and North Carolina in particular is stiff competition – the state known for its pro-growth tax code. This will also impact the creation of Amazon’s second headquarters dubbed HQ2.
The Georgia bill passed the House on Thursday, 134 to 36. Similar legislation has previously passed in the Senate, and the governor supports the bill, so it doesn’t appear that it will face many obstacles before passage.
Georgia Income Tax Decrease
