| Savannah morning news
This is a commentary from Kyle Wingfield, president and CEO of the Georgia Public Policy Foundation, a libertarian-leaning think tank based in Atlanta.
An underrated narrative in recent years is how much more cautious Georgia lawmakers have been on several issues than their counterparts in comparable states.
We’ve seen it with regard to school choice and health care reform, two areas where Georgia has stagnated, while fellow “swing states” like Florida and Arizona are advancing.
And we’ve seen it with regard to tax reform. Last year, Iowa moved to lower its nine-bracket income tax, with a top rate of 8.53%, to a flat rate of 3.9% by 2026. Over the past decade, North Carolina has moved from a three-bracket income tax at 7.75% to a flat rate of 4.75% with more cuts planned. Florida, of course, has no income tax.
Meanwhile, Georgia has commendably flattened our six tranches down to a flat rate, starting next year. But since 2018, the top rate has only gone from 6% to 5.49% for next year, and it’s not planned to drop below 5% until at least 2029. Lower is better, but slower is not.
On taxation, we need to go further, faster.
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Why the rush?
You’ve heard the phrase “vote with their feet” about people moving to places that better reflect their policy preferences. Each year, the Internal Revenue Service reports data on taxpayer movement. The data speaks to the relative attractiveness of states, and we can deduce a few things about policy preferences.
The most recent data, which covers the movements of individual tax returns between 2020 and 2021, shows that Georgia received a net increase of $1.28 billion in adjusted gross income from newcomers. That’s a good thing: it means that the people who moved here brought more income with them than the people who left. That’s better for the local businesses they support and for the state coffers that tax them.
What does that say about people’s policy preferences? While you’d have to question the newcomers to be sure, it seems pretty clear they wanted lower taxes. The six states with the highest taxes according to the impartial Tax Foundation – New York, Connecticut, Hawaii, Vermont, California and New Jersey – accounted for 99.9% of Georgia’s new net income. Movement to and from the other 43 states and the District of Columbia was basically a wash.
That said, the rest of the 10 highest-tax states (Illinois, Virginia, Delaware, and Maine) also sent a net $420 million our way.
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Does the type of load matter?
Georgia has the eighth lowest tax rate, making it very attractive. But seven states take even less from their residents, and they walked away with more than $86 million in former Georgia revenue.
There’s a lesson here, though: the load is one thing, but the type of load may matter more.
In 2021, eight states had no income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. They collectively drew nearly $704 million in revenue from Georgia — more than eight times the amount drawn by states that actually have lower tax burdens.
There are, of course, some caveats to keep in mind. Imposing no income tax won’t help a state if the total burden is quite high (I’m looking at you, Washington State). Proximity matters: The lion’s share of income leaving Georgia went to Florida, which not only has zero income tax, but is also right next door (compared to, say, Texas, which cost 1/16 as much).
And people have other reasons for moving. More taxpayers have moved here from Florida, although that’s not necessarily a good thing since the Georgians who moved south had much higher incomes. The same goes for Utah, Colorado and Wyoming – a geographic cluster that attracted fewer people but more revenue from Georgia, suggesting other motivations. (Go to the mountains!)
Still, it’s clear that lower taxes attract more people with more money, and lower income tax rates are even more attractive than the beaches of California or the bright lights of New York. Perhaps that will spur Georgian lawmakers into action.
Contact Wingfield through the Georgia Public Policy Foundation website at georgiapolicy.org.
