State revenue jumps as Georgians prepay taxes ahead of federal changes

Feb 09, 2018
Gov. Nathan Deal enters the House chamber where he outlined his agenda last month. BOB ANDRES /BANDRES@AJC.COM

State income tax collections shot up $359 million in January as the Department of Revenue took in payments ahead of the new federal tax law.

Overall state revenue jumped 16.7 percent over January 2017.

While sales tax collections were strong — a good sign for the economy — the biggest boost, 27 percent, came from individual income taxes.

The biggest chunk of that was from people making big estimated state income tax payments for the coming year. Those payments went up 81 percent.

The January monthly report includes collections from people who mailed in payments in late December.

State officials across the country saw huge increases in collections in late December as people prepaid taxes, hoping to take advantage one last time of a federal deduction on state taxes that was scaled back by the federal changes enacted by Congress.

The Internal Revenue Service, however, announced in late December that those prepayments could be deducted only in limited circumstances.

State officials say the late-December payments may mean lower numbers in April, when many Georgians traditionally make their payments if they owe on their taxes.

The big revenue increase in January was announced Friday, only a few days before the Deal administration is expected to file legislation to deal with a massive state tax windfall the state is expecting from the federal tax law.

The federal law limits or eliminates 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.

Last month Deal officials said the state could see a $3.6 billion windfall over the next five years from the federal tax bill. New estimates put the potential windfall much higher.

Gov. Nathan Deal said this week that he would support legislation to eat into the windfall by changing state tax codes so at least some Georgians would not wind up paying higher state income taxes.