A proposal to flatten and lower Georgia’s personal income tax rate would lead to the creation of tens of thousands of jobs and put billions of additional dollars in taxpayers’ wallets, an independent analysis has found.
The Georgia Public Policy Foundation contracted with the Beacon Hill Institute to analyze the economic and fiscal effects of the legislation unveiled last week by leaders in the state House of Representatives. The bill would replace Georgia’s six brackets with a flat rate of 5.25%, which is lower than the current top marginal rate of 5.75%. It would create a larger “standard exemption” of $12,000 per tax filer to replace the current standard deduction and personal exemptions, while maintaining the $3,000 exemption per dependent, and eliminate most other deductions. Charitable contributions are among a handful of items that would remain tax-deductible for state tax purposes. The proposed changes would take effect Jan. 1, 2024.
The Beacon Hill Institute, which last year produced a study of possible flat-tax plans for Georgia Policy, found the following economic and fiscal effects for the proposal:
| Fiscal & Economic Effects of 5.25% Flat Rate | 2024 | 2028 |
|---|---|---|
| Private Employment (Jobs) | 19,263 | 21,011 |
| Real State GDP ($ billions) | 1.182 | 1.302 |
| Investment ($ millions) | 452 | 504 |
| Real Disposable Income ($ billions) | 2.107 | 2.339 |
| Total State and Local Revenue Change ($ billions) | (1.037) | (1.312) |
By the fifth year after the reforms took effect, Beacon Hill projects that private employment would be 21,011 higher than it otherwise would be. Georgia’s economy would be $1.302 billion larger than it would otherwise be, thanks in part to investment that is projected to be larger by $504 million. Georgians would have almost $2.4 billion more in disposable income, while government revenues would be smaller by about $1.3 billion.
“Our analysis finds that because of the reduction of the state’s top income tax rate and the elimination of tax brackets, the reward for increased work and saving would rise, motivating investment and economic growth,” said Beacon Hill study co-authors David Tuerck and William Burke.
Beacon Hill created a Georgia-specific version of its State Tax Analysis Modeling Program (STAMP) for last year’s study, and it modified that model to estimate the effects of the new proposal. STAMP estimates the dynamic, as opposed to static, effects of reforms.