Despite federal prohibition, panel backs income tax cut

Amid concerns that the federal COVID- 19 relief bill temporarily outlawed t ax cuts, a Senate panel Tuesday backed a measure to provide a state income tax cut for Georgians who use the standard deduction when they file their returns.

Earlier this month the state House overwhelming approved House Bill 593, which would cut what filers pay by reducing the amount of income the state taxes. So the measure could be one vote away from heading to Gov. Brian Kemp’s desk for his signature.

The bill’s sponsor, House Ways and Means Chairman Shaw Blackmon, R- Bonaire, told the Senate Finance Committee that HB 593 was “a modest and measured tax break for working Georgians.”

Congress put a provision into the federal $ 1.9 billion COVID- 1 9 relief plan t hat passed last week saying money sent to states couldn’t be used for tax cuts, as some in Republican- led states had proposed.

“The purpose of this relief package is to provide aid to families and to people ,” said U.S. Sen. Raphael Warnock, D- Ga. “If the state really wants to save money, it should take the $ 2 billion that I insisted on providing in this package to expand Medicaid.”

It is unclear whether the prohibition on tax cuts would apply to HB 593, but Kemp was angered by the provision and House Speaker David Ralston, R- Blue Ridge, wrote President Joe Biden, the treasury secretary and Georgia’s congressional delegation asking the federal government not to stop the measure.

The tax cut would be relatively small — less than $ 100 for a married couple filing jointly — but would cost the state $ 140 million a year.

Under the bill, the standard deduction for a single taxpayer would increase by $ 800, and for a married couple filing a joint return, $ 1,100. Georgians who are over 65 or blind would get an additional $ 1,300 deduction.

Danny Kanso, a senior policy analyst for the Georgia Budget and Policy Institute think tank, said the state could be docked $200 million over the next two fiscal years by the federal government if it passed HB 593. Instead, he suggested the state make direct payments to Georgians, which the relief act allows.

But Senate Finance Chairman ChuckHuf ste tl er, R-Rome, said he’s heard conflicting arguments about whether that would happen, and his panel showed no interest in stopping the bill.

AJC 2020 State Sen. Chuck Hufstetler ( R- Rome), chairman of the Senate Finance Committee, said he has heard conflicting arguments about whether the proposed state income tax cut is prohibited by the federal legislation.