Of us are sometimes excited about summer season journey or last-minute seaside holidays this time of yr. However in Georgia, lawmakers have one thing else in thoughts: Eliminating the state’s earnings tax.
Whereas Georgia is already on a set schedule to step by step scale back its earnings tax fee over the following a number of years, a latest announcement by Lt. Gov. Burt Jones’ workplace has stirred dialogue about eliminating the Peach State’s earnings taxes — completely.
“If we want to stay the primary state for enterprise and preserve our state aggressive, we should broaden on the progress remodeled the previous 4 years to remove Georgia’s earnings tax,” wrote Jones within the press launch.
But whereas Georgia and different southern states reduce their tax charges this yr, some research recommend reductions in state earnings taxes might disproportionately have an effect on sure taxpayers greater than others.
Subscribe to Kiplinger’s Private Finance
Be a better, higher knowledgeable investor.
Save as much as 74%
Join Kiplinger’s Free E-Newsletters
Revenue and prosper with the most effective of skilled recommendation on investing, taxes, retirement, private finance and extra – straight to your e-mail.
Revenue and prosper with the most effective of skilled recommendation – straight to your e-mail.
Right here’s what to know.
New earnings tax regulation in Georgia and ‘finish to earnings taxes’ proposal
Lt. Gov. Jones has created a bipartisan state Senate committee that can talk about potential methods to remove Georgia’s earnings tax. State lawmakers will meet a number of occasions within the coming months.
Nevertheless, together with issuing rebate checks, Georgia has already reduce its earnings tax fee this yr. The speed dropped from 5.39% to five.19% in 2025, following an earlier discount final yr.
- Every subsequent yr, the speed will lower by .10%.
- The ultimate flat earnings tax fee of 4.99% could possibly be reached by 2028.
Nevertheless, the ultimate fee discount is not going to be as little as some neighboring states. Whereas Florida and Tennessee don’t have any state earnings tax, North Carolina’s flat fee is simply 4.25%.
By the point Georgia reaches 4.99% in 2028, it’ll be barely under Alabama’s prime fee of 5%, and about 1% lower than South Carolina’s. But that’s assuming neither of these states cuts earnings taxes.
This yr alone has seen six southern states scale back earnings tax charges, and Lt. Gov. Jones’ plan could have sparked dialogue in yet one more about decreasing state earnings tax.
South Carolina, Louisiana, and different southern states reduce earnings taxes
A number of information shops are reporting on the opportunity of Alabama chopping its earnings tax fee after Georgia lawmakers introduced their plan to contemplate eliminating the state’s earnings taxes.
Nevertheless, the elimination of the Alabama earnings tax could also be unlikely.
The Cotton State just lately allowed its state’s ‘no tax on additional time’ exemption to run out on account of budgetary issues. An entire elimination of Alabama’s earnings tax would price considerably extra in state income.
However simply because Alabama isn’t getting an earnings tax fee discount, doesn’t imply different southern states aren’t getting one this summer season (or have already obtained an earnings tax fee discount in 2025):
- South Carolina briefly dropped the highest marginal earnings tax fee from 6.2% to six% in July. Additional cuts are attainable.
- Louisiana switched to a flat earnings tax of simply 3% in 2025.
- Mississippi, too, lowered its flat earnings tax to solely 4.4% with one other reduce deliberate for 2026.
- Missouri cuts its prime earnings tax fee by .10%, with future reductions deliberate.
- North Carolina lowered its 2025 flat fee from 4.5% to 4.25%.
- West Virginia dropped its prime earnings tax fee from 5.12% to 4.82% this yr.
Word: Kentucky will decrease its earnings tax fee on January 1, 2026. Equally, Oklahoma will obtain an earnings tax reduce of .25%.
What are the damaging results of tax cuts?
The ‘chopping state earnings tax’ pattern would possibly come at a worth. Based on the Heart on Finances and Coverage Priorities, decrease earnings tax charges can result in state funds cuts in key areas, like training, healthcare, and infrastructure.
- In an evaluation of 26 states that reduce earnings taxes between 2021 and 2023, the Heart reported a 3.6% drop in state income, an quantity equal to greater than a 3rd of what the states’ basic fund spent on greater training.
- Charge cuts in states like Arizona, North Carolina, and West Virginia had been significantly giant, probably shrinking the overall funds of these state budgets by 11% over 5 years.
- Total, everlasting fee cuts had been reported to be “particularly dangerous” to state stability sheets in comparison with non permanent or one-time tax cuts.
Tax fee cuts might also disproportionately have an effect on low-income households that rely extra closely on state-funded public companies.
Nevertheless, supporters of earnings tax fee reductions argue that they improve state competitiveness and entice extra companies to the realm. Extra money in residents’ pockets may also encourage elevated spending within the native economic system.
Georgia Sen. Blake Tillery (R-Vidalia), chairman of the Senate committee on eliminating the state earnings tax, has introduced plans to file laws to section out the Georgia earnings tax. The committee is anticipated to launch its suggestions by December 15, 2025.
However whether or not Georgia residents will see an elimination of state earnings taxes stays to be seen.
