If approved, the bill would take effect beginning Jan. 1, 2022, which means the change would not fully hit the budget lawmakers are writing now, which will end on June 30, 2022.
Before the pandemic scrambled state revenues last year, Ralston was eyeing a larger tax cut, a second reduction in the state’s top income tax rate. With state finances rebounding, Republicans have been talking about resuming that effort.
Legislators cut the top income tax rate from 6% to 5.75% in 2019 as part of a package of changes meant to prevent Georgia’s state income tax collections from increasing sharply after changes to the federal income tax. However, growth in income tax collections undershot forecasts after the changes took effect.
When the first phase of the tax cut was passed, lawmakers envisioned the additional quarter-percentage decrease to 5.5% this year. Ralston still supported it, but some senators expressed doubts. Analysts estimate the state would forgo $500 million to $550 million in revenue from another cut.
House lawmakers also agreed to two bills with tax breaks for businesses by wide margins. Both measures move to the Senate, which has been more skeptical of tax breaks in recent years.
House Bill 587, which passed 157-14, includes a tax break for pharmaceutical and medical equipment makers sought by Gov. Brian Kemp in an effort to increase medical manufacturing in response to COVID-19. The measure lets some businesses who can’t use all their income tax breaks dip into the employee income taxes they collect. Also included is a special tax break aimed at persuading Lockheed Martin or another company to manufacture new military planes at Dobbins Air Reserve Base in Marietta.