Senate passes budget limit amendment

[private]Senate Republicans voted Monday to pass a constitutional amendment (SR 756) that would essentially put a permanent cap on the state budget at its current revenue level.

The amendment, which was sponsored by Sen. Judson Hill (R-Marietta), would impose that budget limit by triggering automatic reductions in the state income tax whenever revenue growth rises above specified levels.

For example, if state revenues in 2018 exceeded $23.6 billion, and the “rainy day” reserve fund held at least 8 percent of that amount ($1.89 billion), the state income tax would be reduced by 0.1 percent.

Since the state income tax is the largest and most stable of the revenue streams for Georgia, cutting that tax rate would have a major impact on the General Assembly’s budget writers. Regardless of how much growth there might be in state population, the budget would be limited to roughly the same level each year.

Senate Democrats warned that the budget constraints could endanger the state’s bond rating, which currently is at the highest level. Hill’s proposal also would make it impossible for Gov. Nathan Deal to achieve his goal of amassing a $2 billion reserve fund level.

“Tax cuts do not pay for themselves,” said Sen. Elena Parent (D-Atlanta), pointing to the massive budget problems Kansas had after Gov. Sam Brownback signed large tax reductions. “Let’s not put our Triple A bond rating at risk.”

SR 756 now moves to the House of Representatives. Passage would require a two-thirds majority, but if the measure is approved by the House it would automatically move to the general election ballot in November for the voters to consider.

Hill is also trying to make another cut in the state income tax rate by hijacking an unrelated bill passed by the House last year, HB 238.

As originally passed by the House, HB 238 would have provided a sales tax exemption for the expansion of the Atlanta aquarium.

Hill rewrote the bill so that it would cut the state income tax from the current maximum rate of 6 percent to 5.4 percent and revise some of the exemptions and deductions that tax filers can claim.

The changes in the income tax rate would reduce state revenues by an estimated $281 million to $442 million a year, according to an analysis by the Georgia Budget & Policy Institute.

GBPI said the majority of the tax benefits from HB 238 would flow to the wealthiest 20 percent of Georgians.

“The bottom 80 percent of Georgia households, or those with incomes below about $100,000, would gain an average tax cut of less than $100 a year,” GBPI said.

Georgians who make more than $500,000 a year, on the other hand, would receive an average annual tax cut of nearly $2,850, the institute said.

The Senate has not yet voted on Hill’s revised version of HB 238. If the Senate approves the bill, the House would have to agree to the changes before the measure would go to the governor’s desk.

© 2016 by The Georgia Report


Tags: budget limits , elena parent , Judson Hill , state income tax , state revenues