Georgians will see a reduction in their income taxes this year, thanks to measures signed by Governor Brian Kemp. The tax cuts, totaling $700 million for residents and businesses, are retroactive to January 1. These cuts come as all 236 seats in the state House and Senate are up for election this year, making tax cuts a popular move among voters. The personal income tax in Georgia has already dropped to 5.49% as of January 1, with a plan for annual decreases until it reaches 4.99% if state revenues remain stable.
To further reduce taxes, a bill signed by Kemp accelerated the decrease in the personal income tax rate, now at 5.39% for this year. This change is estimated to save taxpayers an additional $360 million. Additionally, the corporate income tax rate will also decrease in alignment with the personal income tax rate until it reaches 4.99%. The corporate income tax cut is projected to cost $176 million in its first year and $210 million by 2029, not considering future rate reductions. A bill raising the deduction for dependents to $4,000 from $3,000 was also signed by Kemp, potentially saving taxpayers up to $55 per dependent.
Despite the decrease in tax collections, Georgia is able to afford these tax cuts due to responsible budgeting practices that led to a $10.7 billion surplus. Governor Kemp emphasized the importance of these cuts in alleviating the effects of inflation on Georgia residents. However, economists caution that tax cuts could lead to inflation by increasing the circulation of money in the economy. Kemp also signed a bill aimed at changing property tax assessments, contingent on a voter-approved constitutional amendment in November. This plan would limit increases in a home’s assessed value for property tax purposes to the rate of inflation each year, unless local governments choose to opt out.
The property tax assessment change is designed to prevent what lawmakers refer to as “back door” tax increases, where governments benefit from higher home values without corresponding changes in tax rates. Rising property tax bills are a major concern for many constituents, with overall Georgia property tax collections increasing by 41% from 2018 to 2022. The plan includes a cap for homeowners with a homestead exemption, lasting as long as they own their home. Once the home is sold, the assessed value would revert to the market value. These tax measures, combined with responsible budget management, aim to provide relief to Georgian taxpayers and ensure the state remains financially stable.
