This week, Georgia Lieutenant Governor Burt Jones announced that he has formed a committee to explore the possibility of eliminating Georgia’s income tax, which includes both Democratic and Republican state senators. Keep scrolling to learn all about what this means and see the pros and cons!
What does it mean to eliminate the state income tax?
This one is actually pretty straightforward. Eliminating the state income tax would mean just that: state residents would not pay a state-level tax on their earned income. This has both pros and cons, which we will explore below! Keep scrolling to see more.
Which states do not have state income taxes?
Currently, there are nine states that have eliminated their state income tax. They are (in alphabetical order):
- Alaska
- Florida
- Nevada
- New Hampshire*
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
*New Hampshire currently charges state taxes on interest and dividends but not on income itself. They are set to phase this out after 2026, following Tennessee.
What are some pros of eliminating the state income tax?
The first thought on everyone’s mind: how could this help me? Well, there are both pros and cons to the prospect of eliminating the state income tax. Here are some of the pros, according to SoFi Learn:
- You don’t have to pay taxes on your income. This means that your overall tax bill during tax season will be much lower than states with a state income tax. *You will still have to pay federal taxes, of course.
- Filing taxes is easier. You don’t have to do it at the state level, so that’s one fewer deadline to worry about, and one less thing to have to do come tax season.
- Being a no-state-income-tax state can attract people to move to the state. Having more people move to Georgia can be good for the local economy, since there will be more people participating in shopping local.
What are some cons of eliminating the state income tax?
The second thought on everyone’s mind: how could this hurt me? Like we said, there are both pros and cons to the prospect of eliminating the state income tax. Here are some of the cons, according to SoFi Learn:
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You’ll probably have to spend more on sales and property taxes. Since the government does still need tax money, they’ll have to get revenue through different types of taxes. SoFi explains: “States without income taxes sometimes have higher sales and property taxes, for example. Tennessee, Washington, Nevada, and Texas are all in the top 20 states with the highest combined state and local sales tax. New Hampshire, Texas, and Florida all have property taxes higher than the national average — with the former two in the top 10 states overall.”
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They go further, explaining, “an added con to this: unlike income taxes, which get progressively higher based on your income level and resulting tax bracket, sales taxes are the same no matter how much you make. That means lower-income taxpayers shoulder a heavier tax burden in states with no income taxes, according to the Institute on Taxation and Economic Policy.“
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- There’s less of a budget for infrastructure & education. Of course, with no state income tax, programs that benefit from the state income tax will be hurt. This includes projects like improving infrastructure and investing in education.
- The cost of living could potentially get higher. This isn’t always the case in states with no income tax, but it is a possibility.
This committee was formed by Lt. Governor Burt Jones, who announced last week that he was joining the race for Georgia’s next governor. According to the Savannah Morning News, “The 11-member committee, comprised of eight Republicans and three Democrats, will meet through the summer and issue recommendations by December 15.”