Georgia Makes Strides Toward Tax Competitiveness

After several rounds of negotiations, Georgia lawmakers enacted HB 1437 on April 4th. If certain financial conditions are met, this tax reform bill will consolidate the state’s six individual income tax brackets into one flat rate, ultimately reaching 4.99 percent over a number of years. The bill is awaiting action by the governor.

As it worked its way through the legislative process, HB 1437 saw significant changes that altered its timeline and potential effectiveness. Lawmakers can be proud of the steps that they have taken toward a better tax code but should consider revisiting the design of the bill’s tax triggers in order to better accomplish their goal of responsible improvement.

Round 1

The introduced bill would have consolidated the state’s six individual income tax brackets into one, simultaneously bringing the top rate from 5.75 to 5.25 percent in tax year 2024. The bill would have also eliminated the standard deduction for all taxpayers, instead increasing the personal exemption from $2,700 to $12,000 for single filers and from $3,700 to $24,000 for those married filing jointly, succeeding in eliminating the state’s marriage penalty.

Such legislation would have gone a long way to improve Georgia’s attractiveness among states—bringing the state’s overall rank from 32nd to 16th on our State Business Tax Climate Index, an annual comparison of the competitiveness of state tax structures.