Earlier this year, my colleague, John Carson, who represents part of Cherokee County, introduced the More Take Home Pay Act (MTHPA) to reduce the state income tax rates and diversify the state’s revenues towards more of a consumption tax. Rep. Carson seeks to restructure the state tax code to allow Georgia families to keep more of their own money. Although Georgia remains among the top five states in the country to do business, we must always strive to become even better, particularly since we have the 2nd highest income tax rates among our border states.
Any time such a large initiative is introduced, there will be misconceptions. Here is what the bill does and does not do.
The MTHPA eliminates the income tax — FALSE. The bill incrementally reduces the personal income tax rate from 6% to 4%, and the state corporate tax rate from 6% to 5% over three years.
The MTHPA significantly cuts taxes — FALSE. We are managing the revenue estimates to be revenue neutral, or a slight tax cut. This bill reduces the income tax rate and transitions Georgia to more of a consumption tax. Keep in mind that Georgia was recently ranked by the Tax Foundation as having the 49th lowest state tax burden.
The MTHPA will damage Georgia’s AAA bond rating. According to economists, the bond rating analysts look for diversity and flexibility in our state’s revenues, and the MTHPA improves both.
Income taxes are a more stable source of revenue. By studying over 12 years of state revenue to date, a consumption tax is as reliable as income tax, as compared to state GDP.
The MTHPA “pays for” an income tax cut with taxes on satellite, digital goods and higher cigarette taxes. The additional state revenues from these items would generate less than $400 million annually, where it takes a whopping $2 billion or so to reduce the state income tax by just 1%. The provisions addressing these taxes are for parity in the free market and average rates among our border states.
Finally, the MTHPA does not tax certain purchases suggested in previous proposals, such as Girl Scout cookies, Boy Scout popcorn, lemonade stands, etc. It continues to exempt haircuts, nail care, dry cleaning or any other personal care services, in addition to doctors, lawyers, accountants, architects, engineers or any other professional services.
I sincerely hope that dispelling some of these myths on the MTHPA is helpful. This legislation is not an elimination of the state income tax, but is rather a major step towards lowering our state income tax rates and diversifying towards more of a consumption tax.
It is your money, not the government’s. Under the proposal by Rep. Carson, you keep more of it, and you and your family can decide how to spend it.