Elon Musk’s DOGE squad has dominated headlines during the early weeks of the second Trump administration, with more sure to come. But as Congress pivots from cabinet confirmations to the “one big, beautiful bill” the president wants for his biggest priorities, Washington will return to a hardy perennial: debates over taxes and spending.
Back here in Georgia, the action is less dramatic. Reining in regulations and abusive lawsuits remains a focus of many Republicans under the Gold Dome.
But a similar tension is building here over how much money the government should take from taxpayers and spend on their behalf.
On the surface, you might not know it. That’s because spending has been going up even as tax rates have gone down.
To understand how a state with a balanced-budget requirement has managed that trick, and why that tension is arriving now, we need to look in our rearview mirror.
Five years ago, as the COVID-19 pandemic spread, many observers feared the worst. A prolonged economic shutdown threatened to generate a deep economic recession, with many Georgians losing their livelihoods. The moves by Gov. Brian Kemp to reopen the economy as swiftly as could be safely done, while controversial at the time, helped our state stave off the worst.
That meant many thousands of Georgians kept their jobs and returned to work sooner than their counterparts in other states. They kept putting food on the table.
They also kept paying taxes. As a result, the state didn’t take nearly as bad of a financial hit as feared. Revenues for the budget year that ended June 30, 2020, fell by less than three-tenths of one percent compared to the previous year.
From there, they soared in the two years that followed, rising by $3 billion in 2021 and a stunning $6 billion in 2022.
This surge seemed unsustainable, driven by reckless federal spending and the attendant spike in inflation. Surely, revenues would fall back to earth, right?
The rate of growth has slowed, but it has not stopped. Again in 2023 and 2024, the state took in significantly more than it had the year before. That has allowed state lawmakers to send multiple $1 billion rebates to taxpayers, restructure the individual income tax into a simple flat rate and cut that rate by 36 basis points so far, with another 20 basis-point cut proposed this year.
And yes, spending has gone up, too. Having broken through the $20 billion barrier just a decade ago, the total state funds appropriated this year is on track to hit $40 billion.
That’s right: State spending has doubled in 10 years, to the tune of an additional $20 billion.
Knowing that, you might wonder why there is any unscratched itch to spend even more. Well, here’s the kicker:
Although spending has skyrocketed, it hasn’t kept pace with revenue growth.
One of the most underrated powers the governor wields is the power to set the “revenue estimate,” or how much money he expects the government to take in. The legislature can spend up to that amount, but no more.
In recent years, revenues have consistently outpaced Kemp’s estimates, which is how Georgia has managed to build up an undesignated surplus of some $11 billion above and beyond its official reserve accounts.
I call that prudent fiscal management, because it has allowed the state to increase spending – remember, it has doubled in 10 years – while living within its means.
But many Democrats and more than a few Republicans would like to spend even more, even as seemingly most Republicans would prefer to keep cutting tax rates — thus, the tension I mentioned earlier.
It’s easy to spread money around during fat times. But lean times will follow; they always do.
The state’s recent course of budgeting modestly and gradually trimming tax rates to avoid overcharging taxpayers has been working. Staying that course is the wise thing to do.
