Brian Kemp signs Georgia income, property tax cuts. Now comes the hard part.

Kemp signed both bills at the Georgia Capitol while surrounded by state lawmakers. He said cutting taxes is a hallmark of conservative budgeting and leadership.

“While other states like California and Maryland are raising taxes, here in Georgia we’re giving money back to the people,” he said.

But the governor also suggested the income tax cut could have consequences for the state budget that he is expected to sign into law on Tuesday. He could wield his veto power to trim some spending.

Critics — including most Democrats — say the tax cuts will play havoc with state and local government finances, forcing governments to raise sales taxes that disproportionately affect low- and middle-income Georgians.

“As we’ve said all year, this fake populism tries to distract voters from the truth — these bills are just more GOP giveaways to the wealthy on the back of our middle class,” Senate Minority Leader Harold Jones II, D-Augusta, said in a statement to The Atlanta Journal-Constitution.

In signing the laws, Kemp has given Republican leaders a partial victory in an election year dominated by affordability issues.

Credit: Ben Hendren

Credit: Ben Hendren

Lt. Gov. Burt Jones, who is running for governor, wanted to eliminate the individual income tax by 2032. But that didn’t happen, mostly because the tax is the state’s largest source of revenue, generating nearly $16 billion annually.

In February, Jones unveiled a plan that constituted a down payment on that promise. It would have nearly quadrupled the standard deduction — essentially eliminating the income tax for two-thirds of Georgians. To help pay for it, the bill would have eliminated hundreds of millions of dollars of sales and income tax breaks.

The scaled-back law Kemp signed raises the standard deduction by 25%. It raises the standard deduction for married couples filing jointly from $24,000 to $30,000 next year and the deduction for other filers from $12,000 to $15,000. It raises the deduction for each dependent from $4,000 to $5,000, and it would exempt up to $1,750 in cash tips and $1,750 in overtime income from taxation through 2028.

The bill also reduces the income tax rate from 5.19% to 4.99% this year. If the state meets certain revenue targets, the rate would be further reduced to 3.99% over eight years.

On Monday, Georgia House Speaker Jon Burns said the bill will return $2.9 billion a year to taxpayers. That also means $2.9 billion less in state revenue.

Credit: Ben Hendren

Credit: Ben Hendren

Meanwhile, the handful of tax breaks the law eliminates will only raise about $107.4 million over five years, an Atlanta Journal-Constitution analysis found.

Though Georgia has accumulated sizable budget reserves in recent years, legislators have been quickly spending that money. They have cut the income tax rate, suspended the gas tax and, most prominently, they have sent up to $500 checks to most taxpayers for the fourth time in five years. This year, lawmakers also agreed to use $850 million of the surplus to send similar payments to most homeowners.

That could be one reason why Kemp on Monday suggested he may trim spending when he signs the 2027 budget on Tuesday.

“We’ve got a budget that I’ve still got to sign,” Kemp told reporters. “We’re going to make sure that we’re good fiscal stewards of our resources. And we’ll have more to say about that tomorrow.”

While Jones focused on reducing the income tax, Burns’ top priorities included lowering property taxes. He wanted to eliminate the tax on “homestead” properties, or residents’ primary single-family homes.

The scaled-back SB 33 caps property tax assessments on properties at the rate of inflation. It also allows cities and counties — but not school districts — to either raise sales taxes or use existing sales tax revenue to reduce property taxes for homeowners. Plus, if a local government completely eliminates taxes on homesteads, the law would let them lower property taxes on other types of properties. The maximum total sales tax in most places remains 9%.

Democrats say the law will force local governments to raise sales taxes.

“You see explicit authorization for higher taxes on gas, groceries, and alcohol — all to pay for rich people’s tax cuts,” said Harold Jones II, the minority leader.

Burns said lawmakers will work with local schools and governments to ensure they can provide essential services. But he said Georgians are crying for property tax relief.

“We believe that we can do something in this state, especially when it comes to homestead property taxes,” Burns said. “It needs to be addressed.”