SB 168: Individual Tax Rates; reduction of the state income tax over time; revise provisions

Georgia's state income tax rate has been on a schedule of small annual cuts, currently set to fall by 0.10 percent per year starting in 2025 until it reaches 4.99 percent. Those cuts can also be delayed a year if state revenue growth, past collections, or the state's reserve fund don't meet certain thresholds. This bill rewrites that law (O.C.G.A. § 48-7-20). It changes the annual reduction from 0.10 percent to a full 1 percent, moves the start date to January 1, 2026, and changes the final target rate from 4.99 percent to 0 percent. It also removes the delay conditions tied to revenue estimates, prior collections, and the state's Revenue Shortfall Reserve, along with the requirement that the Office of Planning and Budget report on those conditions each year. The changes would take effect July 1, 2025, and apply to tax years starting on or after January 1, 2026.

• Increases the annual state income tax rate cut from 0.10 percent to 1 percent per year, a much faster reduction schedule.
• Changes the ultimate target for the state income tax rate from 4.99 percent down to 0 percent, meaning the tax could eventually be eliminated.
• Moves the start of the new reduction schedule to January 1, 2026 instead of January 1, 2025.
• Removes the three conditions that could delay a scheduled rate cut, including revenue growth targets and the state's reserve fund balance.
• Eliminates the requirement that the Office of Planning and Budget report annually on whether a rate cut should be delayed.
• Sets the changes to take effect July 1, 2025, applying to tax years beginning on or after January 1, 2026.

Georgia individual income taxpayers, whose tax rate would fall faster and further over time; the state budget process and agencies that rely on income tax revenue; and the Office of Planning and Budget, which currently monitors and reports on conditions for delaying rate cuts.

Georgians would see their state income tax rate drop faster and potentially reach zero, but state government would lose the built-in checks that currently pause tax cuts when revenue growth slows or reserves run low, changing how automatic the cuts are regardless of budget conditions.

• Section 1 amends O.C.G.A. § 48-7-20(a.1) to change the annual rate reduction from 0.10 percent to 1 percent, starting January 1, 2026.
• Section 1 changes the floor for the tax rate reduction from 4.99 percent to 0 percent.
• Section 1 strikes the three delay conditions (revenue estimate growth, prior year collections, and Revenue Shortfall Reserve balance) that could postpone a scheduled cut.
• Section 1 removes the requirement for the Office of Planning and Budget to report annually to legislative leaders on delay determinations.
• Section 2 sets the effective date as July 1, 2025, applying to taxable years beginning on or after January 1, 2026.
• Section 3 repeals conflicting laws.

1. 2025-02-18Senate Read and Referred (Senate)
2. 2025-02-13Senate Hopper (Senate)

• Colton Moore (R, SD-053)Primary sponsor

• state income tax
• tax rate cuts
• income tax reduction
• Georgia budget