Georgia Public Policy Foundation's Kyle Wingfield speaks to House Ways & Means about tax reform
Georgia Public Policy Foundation's Kyle Wingfield addressed the House Ways & Means Committee on February 21, 2024 about Georgia's next step in tax reform and remaining competitive in a low-tax environment.
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When Georgia enacted the Tax Reduction and Reform Act of 2022 (House Bill 1437), it began the hard work of fixing an outdated, uncompetitive tax code. The law simplified five income tax brackets into a flat 5.49 percent tax for all earners, eliminated federal tax deductions, and raised the standard state deductions for single and married filers. Those are positive reforms that take significant steps in the right direction. But to compete more effectively with other low- and no-tax regimes in North Carolina, South Carolina, Tennessee, and Florida, there is more work for Georgia to do. House Bill 1437 includes revenue triggers, for example, that will reduce the 5.49 percent flat tax to 4.99 percent by 2030—but those revenue targets must be reached. And the state’s tax code still includes unnecessary and expensive tax credits that can and should be eliminated to allow Georgia to responsibly lower its flat-tax rate even further.
Competitive state tax codes have become increasingly important as high-skilled, high-income earners adapt to a post-pandemic “remote work” environment. Because many jobs may now be done from virtually anywhere in the country, workers are paying more attention to state and local tax regimes and the potential for local and regional economic growth. Migration data from 2021-2023 show that high-income earners have moved to states with lower income taxes—and with the third highest state income tax in the region, Georgia looks unlikely to continue to attract or retain relocating workers without more competitive tax reforms. But the state’s budget surplus and reserve funds create economic and legislative flexibility to phase in sustainable tax improvements that will keep more money in the private sector to foster more growth and investment.
Ideally, to help maximize growth, tax codes should be simple and transparent with low rates and broad bases. Governor Brian Kemp and the Georgia legislature are right to pursue tax cuts and other reforms that meet those objectives. To assist that effort, The Buckeye Institute modeled four tax reform scenarios designed to spur even more economic growth: (1) gradually reducing the state income tax to 3.99 percent by 2030; (2) eliminating the corporate income tax over five years; (3) gradually cutting income taxes by $5 billion over five years; and (4) cutting personal income taxes by $500 million paired with a one-for-one income tax expenditure elimination. Three of the four scenarios yield strong economic growth, increased private sector investment, higher consumer spending, and more jobs.