The Deal administration has filed legislation that doesn’t address the revenue windfall the state will see from the federal tax overhaul passed by Congress in December but would eliminate state jet fuel taxes for airlines.
While the Deal administration was hoping for quick passage of House Bill 821 — an annual measure wedding changes in federal tax law to the state tax code — lawmakers raised concerns about it even before it was filed Thursday.
Interest in what is typically a fairly routine bill was heightened after The Atlanta Journal-Constitution reported that the federal tax plan could result in a $3.6 billion windfall for the state over the next five years if no changes are made in state tax law.
With lawmakers running for re-election or seeking higher office this fall, such a windfall — which amounts to a state income tax increase on some Georgians — is unwelcome. Nobody wants to run on a state tax increase, especially when members of Congress will be running on a cut in federal taxes.
“Any windfall should be returned to Georgia taxpayers as quickly as possible,” said state Sen. David Shafer, R-Duluth, who is running for lieutenant governor.
Lt. Gov. Casey Cagle, who is running for governor, said, “I’m committed to comprehensive tax reform that will — at a minimum — return every surplus dollar collected back to Georgia taxpayers.”
If the administration’s estimates are correct, Georgians would pay an additional $153 million in state income taxes this fiscal year, which ends June 30. That figure jumps to $758 million in the next fiscal year, which starts July 1.
That’s largely because the federal tax law limited or eliminated some of the deductions Georgians have used when figuring their state taxes in the past and made it far more likely that ratepayers will use the standard federal deduction, rather than lowering their state taxable income using itemized deductions.
So while many Georgians may pay less in federal taxes, at least some will wind up with bigger state tax bills unless lawmakers make some changes in the tax code.
State Sen. Michael Williams, R-Cumming, who is running for governor, said giving back the windfall shouldn’t be difficult for lawmakers.
“The state needs to lower the income tax (from 6 percent) to 5 percent to offset the projected windfall,” Williams said. “But what Georgia really needs to focus on is eliminating the state income tax.”
The administration’s numbers are only an estimate because officials aren’t sure exactly how much more money the state will take in.
Lawmakers take up the conformity legislation every year. The Deal administration, however, is asking legislators not to make any changes related to the federal tax plan until the state figures out the impact.
Deal won’t make plans to spend the windfall by putting it in the state budget, in large part because he doesn’t know how big it will be.
“The last thing we want to do is have a special session in the fall and raise taxes or cut the budget,” said his chief of staff, Chris Riley. “Georgia prides itself in the fact that we are not one of the 29 states this year that had to go back in and cut its budget, nor are we one of the 22 states that had to raise taxes to have a balanced budget.”
Deal leaves office in January, and the question of what to do with the windfall will certainly become a major issue in this year’s campaign season if lawmakers make no change to the bill.
The bill also re-creates a state sales tax exemption on jet fuel, something that was done away with in 2015 when Delta Air Lines officials got on the wrong side of lawmakers.
Eliminating the state and some local taxes would amount to a break of about a $35 million for airlines and cargo companies.
Airlines that fuel up in Georgia pay the fourth-highest tax in the country, with competing states such as Florida, North Carolina and Texas having no or lower taxes. Administration officials say they hope the savings in fuel taxes will persuade airlines such as Delta to provide more direct international flights.
The airlines will have to sell lawmakers on the idea because the General Assembly — while typically tax-exemption-friendly to businesses — hasn’t been receptive to attempts at revisiting the jet fuel issue.
Williams, for one, will be vocal in the fight.
“I will vote against any corporate welfare for Delta,” he said. “Our state is all too happy to give away billions of our dollars to Amazon, Delta and whoever else donates the most money to the establishment.”
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