Georgia Introduces New Income Tax Reforms to Support Middle-Class Families

Overview of Fiscal Year 2025 Tax Legislation

Today, July 1, marks the start of Fiscal Year 2025 in Georgia, accompanied by the implementation of several key legislative changes aimed at restructuring the state’s tax system. These measures, informed by insights from the Tax Foundation and the Georgia Budget and Policy Institute, represent a proactive approach to enhancing economic stability and providing relief to taxpayers amidst rising living costs.

Reduction in Personal and Corporate Income Tax Rates

On January 1, 2024, Georgia transitioned to a flat individual income tax rate of 5.49%, down from the previous top marginal rate of 5.75%. Through House Bill 1015, the state retroactively reduced this rate further to 5.39%, with plans for incremental annual decreases until reaching 4.99% in future fiscal years.

Simultaneously, House Bill 1023 aligned Georgia’s corporate income tax rate with the revised personal income tax rate of 5.39%, down from 5.75%. This adjustment aims to streamline tax policies and foster a more competitive business environment within the state.

Support for Dependents and Financial Impact

House Bill 1021 introduces an increase in Georgia’s income tax exemption for dependents from $3,000 to $4,000 per person claimed. This adjustment, effective immediately, provides direct savings for families supporting dependents such as elderly parents or children, offering financial relief estimated at up to $54 per dependent.

Enhanced Transparency and Accountability

Effective January 1, 2025, Senate Bill 366 mandates regular economic analyses of existing and proposed tax measures. This initiative, aimed at enhancing transparency and accountability, particularly in relation to corporate tax breaks, reflects ongoing efforts to improve Georgia’s fiscal governance.

Assessment and Considerations

Staci Fox, President and CEO of the Georgia Budget and Policy Institute, acknowledges the positive steps taken by these legislative changes but highlights concerns regarding their distributional impacts. She notes that while these reforms are projected to cost the state approximately $660 million in 2024, the majority of benefits primarily favor higher-income households.

Looking Ahead

As Georgia moves forward into Fiscal Year 2025, the implementation of these tax reforms signals a proactive effort to stimulate economic growth and alleviate financial burdens for middle-class families. While these adjustments aim to improve economic resilience and support households facing rising living costs, ongoing evaluation and consideration of more targeted fiscal measures will be crucial to ensuring equitable support across all income levels.

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Sources:

Tax Foundation – www.taxfoundation.org/research/all/state/2024-state-tax-changes-july 1/#:~:text=the%20federal%20credit.-,Georgia,flat%20rate%20to%205.39%20percent.

Georgia Budget and Policy Institute – www.gbpi.org/major-tax-bills-take-effect-with-beginning-of-fiscal-year-2025/