State Plans to Begin Risky Income Tax Shift in 2024

House Bill 1437, signed into law by Gov. Kemp after a final version emerged during the last hours of Sine Die 2022, sets Georgia on course to adopt a flat personal income tax that primarily benefits the state’s highest earners at an annual cost of $2 billion when fully implemented. This session, legislators made positive changes to the original package through the passage of Senate Bill 56, which preserves and strengthens the standard deduction, rather than shifting to a new and less equitable filing system as the previous version called for.

Although the flat tax plan requires overall revenue growth of at least 3 percent to proceed without interruption through six steps to achieve full implementation by 2030, forgoing $2 billion in annual personal income tax revenues threatens the long-term stability of Georgia’s revenue system and places a continued burden on the state’s ability to meet the needs of its residents. Already, Georgia ranks last nationally—No. 50 out of 50—in the amount of general state revenues it raises per person (FY 2020).

Due in part to historic and systemic policies that have contributed to lower levels of income and wealth for Black Georgians and people of color, these tax changes would worsen racial inequities and expand the racial wealth gap. White Georgians (55 percent of tax filers) would see 66 percent of total benefits, and Asian Georgians (3.2 percent) would gain 4.6 percent of savings, while Black Georgians (32 percent) would see just 22 percent, and Hispanic Georgians (8 percent) benefit from 6 percent of the total tax cuts.

For Georgia families earning the median income or less, these pending tax changes would offer little to lift incomes or meaningfully increase economic opportunity. Rather, the changes may redirect resources from programs and services that could otherwise support working families, thus widening disparities across income, race and ethnicity. Unless further action is taken, the tax changes will become effective beginning on January 1, 2024, and are set to be implemented over a period of at least six years.