A bill that would reduce Georgia’s top income tax rate to 5.25% from the current 6% was read for the first time in the House this morning. House Bill 435, sponsored by Reps. B.J. Pak of Lilburn and Brett Harrell of Snellville is the first of two tax related bills to be introduced this week. The other bill, which is expected to propose moving the state more towards a consumption tax, will be introduced by Rep. John Carson of Marietta at a 4:30 PM press conference.
In order to make the Pak/Harrell bill revenue neutral, there would only be two allowed itemized deductions: charitable contributions and home mortgage interest under $20,000. That would mean the elimination of many current deductions, including property and state income taxes paid, medical and dental expenses, casualty losses, and many miscellaneous deductions. While no fiscal note has been issued, Harrell says that research prior to the start of the 2015 session points to the tradeoff between fewer deductions and a lower rate as revenue neutral.
He also points out that the bill is designed to be have a small impact on most taxpayers, except for the tax benefit. Most taxpayers, of course, claim the standard deduction, and wouldn’t be affected at all. And as far as the limit on mortgage deductions, even if the interest rate rises to 8%, only mortgages over $250,000 would be affected.
Neither this bill nor the Carson bill to be introduced this afternoon are expected to pass this year. Instead, they are meant to start a conversation that could lead to real tax reform by the end of the session in 2016.