Meaningful Tax Reform That Doesn’t Break the Bank

The plan to eliminate Georgia’s income tax has sparked much debate at the state Capitol. Eliminating income taxes might sound appealing, but it only means increasing taxes somewhere else. Last year, Burt Jones, the Republican Lieutenant Governor, announced a new study committee to find a way to end Georgia’s state income tax. Republicans recently unveiled the committee’s final report, which urges legislators to eliminate our state income tax by 2032.

Releasing this plan during an election year was not coincidental, and Republicans want to treat tax cuts as a solution for the unaffordability of housing, childcare, and insurance. However, governments have to provide services somehow, and this proposal means raising taxes on others. Georgia’s personal income tax accounts for around 40% of state revenues, which total $38 billion. Republicans noted that nine states do not have an income tax, but failed to mention that those states rely far more on sales taxes. For example, Florida, Tennessee, and Texas all have sales tax rates 2-3% higher than Georgia’s. Their sales taxes also cover more goods and services.

Republicans make several sweeping claims in their final report. They claim that conservative budgeting will enable their plan and Georgia will not have to raise any new or existing taxes. The problem is that we already rank just 41st in state spending per person and 44th for total taxes collected per person. Our state cannot extract much more money from low spending and low revenues.

Therefore, the most likely outcome of income tax cuts is that we will have to increase and broaden our state sales tax. Right now, it is the second-largest source of funds for Georgia. However, sales taxes are widely recognized as regressive. Essentially, this means the poorest in society pay a higher tax rate than the richest. Instead of relieving taxes equitably, this policy is a handout to rich Georgians.

Fortunately, there are better ways to help relieve the income tax burden. One solution is to raise the personal income tax exemption. Currently, the first $12,000 for individuals or $24,000 for joint filers is exempt from state income taxes. This is an equitable form of tax relief because lower-income earners have a greater proportion of their income exempted. Because earners who would benefit the most are living paycheck to paycheck, that money would also return to Georgia’s economy. If meaningful tax relief is the true goal, exemption increases better target those who need it the most.

Notably, Republicans recognize this, too. In addition to recent flat tax cuts, Republicans also significantly increased the personal exemption, quadrupling it back in 2022. The final report argues for continuing this trend in 2026. A key recommendation was to quadruple the personal exemption for individual and joint filers to $50,000 and $100,000, respectively. The report noted that this would cost $6 billion per year, around 40% of personal income tax revenue. However, this would eliminate the state income tax for over two-thirds of Georgians.

While cutting 16% of Georgia’s general funds at once would be a poor financial decision, increasing the exemption is a solid goal. In the final report, Republicans mentioned eliminating corporate tax breaks as a source of additional revenue. Many Democratic legislators already advocate for many of those policies, such as eliminating a $500 million annual sales tax exemption for data centers. If we eliminate the income tax entirely, many of those savings would disappear. However, by using those funds for a smaller increase in the personal exemption, we can be more fiscally responsible while helping those who need it the most. 

This reform would help lead to a fairer tax system in Georgia. Likewise, another program, the Earned Income Tax Credit (EITC), is another example of targeted tax reform that can help alleviate the income tax burden. The EITC functions much like an increased exemption, although it fluctuates by income level. Workers below a certain income level are eligible for a refundable tax credit that gradually phases out as they make more money. Essentially, the EITC is a tax break only for low- to moderate-income workers. Currently, Georgians can only claim the EITC on federal taxes, while 23 states have already created a state-level EITC supplement. 

Fortunately, Democrats have already introduced bills to do just that. These bills are HB 316 and SB 67, both supported by Democratic leaders in the state legislature. However, legislators will have to work together to help pass these bills. By setting aside partisan differences, Georgia can achieve real progress in tax reform.

Together, income tax exemptions and the EITC will serve working-class Georgians better than eliminating income taxes. It is time to finally put policy over politics and pass legislation that helps working people without breaking the bank.