The Republican-backed legislation zipped through the General Assembly in the last few days of its annual session with little dissent from Democrats. Republican lawmakers urged their colleagues to support the plan as a way to attract employers in a state with 9.1 percent unemployment.
Budget officials estimate the tax breaks will create a $49 million deficit next year, a gap equivalent to less than 1 percent of the state budget.
Deal supports the legislation, which would meet tax promises he made during his campaign.
“We have passed a pro-family, pro-jobs tax plan that will go a long way toward making Georgia the No. 1 place in the nation to do business,” said Deal spokesman Brian Robinson.
The bill benefits several categories of people and companies:
• Married couples would get a $2,000 increase in the amount of income they can shield from the state’s income tax.
• The state would slowly phase out the annual property tax on motor vehicles. People who buy new or used cars or trucks after March 1, 2013, would pay a one-time tax that tops out at 7 percent. They would no longer get an annual property tax bill pegged on the value of their vehicle. People who keep their car or trucks past that date will keep paying the annual tax until they buy a new vehicle.
• The sales tax that manufacturing, mining and newspaper companies pay on the energy used to produce their goods would be phased out over four years. Only 14 states including Georgia still tack sales tax onto the utility bills of manufacturing plants, according to the National Conference of State Legislatures.
• Tax credits for the agriculture industry, the state’s largest economic sector, would expand.
• State officials could waive the sales tax on construction materials for companies that build major projects in Georgia.
Some would lose out under the plan:
• Major Internet retailers would be required to collect the state sales tax on purchases made by Georgia residents. While consumers must now pay that tax, few do.
• Film productions would lose their sales tax exemption.
• Georgia would freeze a tax exemption on retirement pay at $65,000 instead of allowing it to become an unlimited exemption. Residents can still benefit from additional exemptions on retirement income.
Sen. Don Balfour, R-Snellville, urged his colleagues to support the plan since he said it would attract employers. He reminded his colleagues that they face re-election this fall.
“I know when you knock on doors this summer, the biggest question is jobs,” Balfour said. “And this will help jobs in our cities and our counties and our state.”
The passage of the bill marked the General Assembly’s second major attempt to change the tax code in as many years. A more sweeping proposal last year would have cut the personal income tax rate from 6 percent to 4.5 percent. But it also capped many itemized deductions. Democrats – using nonpartisan data – sunk the proposal by arguing the plan would have required many middle-class residents to pay more in taxes.
This year, Republican leaders settled for a package of narrower tax changes. Sen. Bill Heath, R-Bremen, a member of the committee that devised the tax plan, said lawmakers want to make deeper changes as the economy improves and the state collects more tax money.
“We should have been focused on cutting Georgia’s income tax rate,” Heath said.