The Atlanta Journal-Constitution
Senate panel backs bigger income tax cut
Bill also would cap state tax breaks for movie industry.
A Georgia Senate panel on Monday supported gradually lowering the state’s income tax rate from 5.75% to 4.99% and putting a cap on how much the state spends on its lucrative film tax credit.
The Senate Finance Committee rewrote House Bill 1437, which would have cut the income tax rate to a flat 5.25%.
The original House bill would save taxpayers $1 billion a year. The House approved the proposal, backed by House Speaker David Ralston, R-blue Ridge, earlier this month.
Under the Senate version, the income tax rate would gradually fall to 4.99% for everyone. In the first year the measure would take effect, 2024, the first $20,000 of
income earned by Georgians would be taxed at the lower 4.99%. Personal exemptions would also be increased.
Senate Finance Chairman Chuck Hufstetler, R-rome, said the Senate version would also include an income tax credit to help lower-income Georgians.
Critics of the House version said 500,000 families would pay higher taxes under its plan because of changes it made in tax law.
“We were really trying hard to not have anyone paying higher taxes,” Hufstetler said.
The Senate measure would allow the eight-year phase-in to slow if the state were to experience a recession and revenue collections fall.
Hufstetler said the Senate proposal would also limit the amount of money the state spends on the film tax credit to $900 million a year. Probably more important for the industry, it would eliminate the ability of film companies to sell their tax credits.
The film tax credit has been a policy mainstay over the course of recent Republican administrations. Georgia has grown its film industry by leaps and bounds by giving the nation’s most lucrative credits for film work.
About 80% of the credits are sold by film companies that pay little in Georgia taxes to people or companies that owe state taxes, according to state auditors.
So, for instance, if a film company spends $3,333,333.33 in Georgia and meets all the necessary state criteria, it can earn a 30% tax credit worth $1 million.
But since many companies aren’t based in Georgia, they owe little or no money in state taxes, so they sell the credit — for cash — to any entity that owes state taxes. Those entities — often other companies — buy the credits at a discount. They may pay $800,000 for a $1 million credit. The film company receives the $800,000, and the buyer — either a person or company — sees a $1 million reduction in taxes.
Sen. Nan Orrock, D-atlanta, said the industry supports 75,000 jobs in Georgia.
“I would feel very cautious about whacking this tax credit,” Orrock said. “It’s hard to have a comfort level with that being added in.”
How much of the Senate’s plan survives will be determined by what happens when it begins negotiating with the House.
“We obviously know this is going to go back and forth between the House and Senate,” Hufstetler said.
The General Assembly session is scheduled to end April 4.