The so-called “More Take Home Pay Act” lowers the state income tax from 6% to 4% over several years, while increasing the state sales tax from 4% to 5%. The GOP says the tax reform – House bill 445 – would result in an increase of 14,000 jobs for the state based on computer model projections carried out by Georgia Tech University. It is estimated that a household earning the state’s median income of $48,000 would take home an extra $400 – $1,200, depending on the source. The higher sales tax would hit low-earners the hardest, by an estimated $50 per month, since the sales tax would be expanded to include groceries, among other items.
Not surprisingly, the proposed bill has received ire from the left. They contend that the reduction in income tax will disproportionately affect the wealthy, while lower- and middle-income Georgians will be hit hardest by the increase in the sales tax.
The bill is a renewed attempt at tax reform that was stymied in 2011 despite support from an independent commission of economists and business executives. Democrats in the House rallied and eventually killed the bill the last time, and have begun raising the same objections since the bill’s introduction this year.
In supporting the bill, Speaker David Ralston mentioned competition with other states as a contributing factor: “We need a tax structure that encourages families to save and businesses to invest so that Georgia can remain competitive with our neighboring states.” Under the proposal, a sales tax rate of 5% would be lower than all but Alabama, Louisiana and North Carolina; a 4% income tax rate would be lower than all other Southern states except Florida and Tennessee, which have no income tax.
Republican congressman Jason Spencer knows passing the bill will be an uphill battle, saying that “once you’ve given people that [food tax] exemption, you can’t take it away.”
The chair of the economics department at Georgia Tech, who is responsible for the projections of the bill’s impact on job creation, also remains skeptical about the new proposal passing, saying that “tax reform is really hard…and it takes a long time.”