Getting Rid of Georgia’s Income Tax: A Look at The Issues

Policy wonks on both sides of an upcoming debate in the General Assembly over whether to eliminate Georgia’s income tax are advocating a cautious approach.

“That’s a very lofty goal,” said Danny Kanso, senior fiscal analyst with the progressive-leaning Georgia Budget & Policy Institute. “The income tax represents 56% of general-fund revenues. Nineteen billion dollars would leave a massive hole.”

“You can’t just cut spending,” added Kyle Wingfield, president and CEO of the Georgia Public Policy Foundation, a think tank that advocates free-market approaches to public-policy issues. “You have to be thoughtful about how to make the math work.”

Lt. Gov. Burt Jones, who presides over the Georgia Senate, has formed a legislative study committee to consider whether to get rid of the state income tax. Jones, a Republican, has made abolishing the tax a key platform plank as he seeks the GOP nomination for governor next year.

Republican governors and the legislature’s GOP majorities have moved in that direction in recent years, reducing the income tax rate from 6% to 5.75% in 2022, then ratcheting it down further to 5.49%, 5.39% and – this year – to 5.19%.

But Republicans have stopped short of attempting to repeal the tax altogether. State Sen. Blake Tillery, R-Vidalia, who will chair the study committee, pledged to rectify that during a news conference July 24, vowing to introduce legislation during the 2026 General Assembly session to get rid of the tax.

Tillery said nine states do not impose an income tax, including the neighboring states of Tennessee and Florida as well as the swing states of Nevada and New Hampshire and deep-blue Washington state.

“This is about competitiveness, economic freedom, and letting hardworking Georgians keep their money in their pockets,” he said.

Tillery promised to chart a “realistic and responsible path” toward ending the income tax, acknowledging the difficult task ahead.

Kanso said the incremental reductions in the income tax rate lawmakers have approved thus far were accomplished by cutting spending rather than increasing other taxes. Getting the income tax rate even close to zero would require additional sources of revenue, he said.

“They haven’t replaced income taxes with another tax,” he said.

The next-largest source of state revenue after income taxes – the sales tax – would be a logical place to look. Way back in 2010, a special committee of lawmakers and business leaders formed to overhaul Georgia’s tax system recommended that the state move more toward taxing consumption and away from relying as much on taxing income.

But the group’s report went nowhere amid opposition to politically unpopular proposals like taxing groceries or services.

“What you’re really saying is, ‘We’re going to start paying taxes on things we haven’t paid taxes on before,’ ” Kanso said. “It becomes a much more difficult position to sell.”

Wingfield cited a study the Georgia Public Policy Foundation conducted before the pandemic that concluded the state income tax rate could be lowered to 3% by taxing some services or raising the state sales tax rate from the current 4%.

He said one politically palatable way to begin taxing services would be to limit the tax to goods a business provides but not the service components of its operation, for example an oil-change company that taxes only the oil but not the labor.

Wingfield also cautioned against taxing services in a way that would hurt a business’s ability to compete with busineses in neighboring states.

“The trick with services is they can be pretty mobile,” he said. “You don’t want a tax that would drive business to other states.”

Kanso said it’s poor timing to consider getting rid of Georgia’s income tax when the impact President Donald Trump’s budget bill will have on state budgets remains uncertain.

“New costs are going to be pushed on to the state,” he said. “It is an open question of how can we afford to do this?”

State Sen. Nan Orrock, D-Atlanta, a member of the study committee, said the Trump administration’s push to eliminate the Federal Emergency Management Agency is just one example of what could affect state budgets.

“We’re already grievously behind in getting federal money for a once-in-a-generation storm that swept our state,” said Orrock, referring to the devastation Hurricane Helene wreaked on Georgia farmers and businesses last September. “We’re in an era of climate change. … To cavalierly say the states are going to pick up the costs would leave us full of unanswered questions.”

Tillery said it’s premature at this point to determine how the state should replace the lost revenue from repealing the income tax. He said that’s what the study committee is for.

However, the upcoming debate won’t be so much about whether to abolish the tax but on how to accomplish it, Tillery said.

“It may not happen overnight,” he said. “[But] my goal is to move in this direction.”