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State economist: Additional tax cut not needed
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ATLANTA — The General Assembly does not need to pass another tax cut to grow Georgia’s economy, State Economist Jeffrey Dorfman said Tuesday.

Georgia lawmakers reduced the state’s income tax two years ago from 6% to 5.75%, the first change in the rate since the 1930s. The 2018 bill called for the legislature to vote again this year whether to reduce the tax rate again to 5.5%.

But with employment in Georgia and the state’s unemployment rate already at record highs, cutting taxes again would not be an effective way to increase economic activity by luring other businesses to the Peach State, Dorfman told members of the state House and Senate Appropriations committees at the start of three days of budget hearings.

“A quarter percent one way or the other just doesn’t move the bar,” Dorfman said.

The $28.1 billion fiscal 2021 state budget plan Gov. Brian Kemp unveiled last week does not take into account the $500 million revenue hit the state would absorb if the General Assembly follows through with the additional .25% tax cut.

In an interview just before the start of this year’s legislative session, Kemp noted the tax cut was an initiative then-Gov. Nathan Deal steered through the General Assembly before Kemp took office and there might not be “an appetite” among lawmakers to approve the additional cut.

Legislative Democrats and some Republicans have argued now is not the right time to cut taxes further, as lawmakers take up a proposed budget full of spending reductions Kemp has recommended to account for a slowdown in tax collections since the middle of last year.

But other members of the legislature’s Republican majority, including House Speaker David Ralston, R-Blue Ridge, have endorsed following through with the second installment of the tax cut to fulfill a promise GOP candidates made on the campaign trail.

On Tuesday, Dorfman said the first tax cut two years ago already has achieved what Deal set out to do in 2018 by wiping out any revenue windfall the state expected to receive from congressional passage of tax reform legislation in late 2017.

“We did a good job giving the windfall back to taxpayers,” he said. “We don’t need that additional quarter-point cut to take care of that.”

Dorfman, who warned lawmakers last September there might be a mild recession in Georgia early this year, gave a more optimistic economic forecast on Tuesday. He said all economic indicators show the state should avoid a recession barring an international crisis such as a renewal of the trade war between the U.S. and China or a disruption in the oil markets of the Middle East.

With tax revenue growth slowing dramatically in Georgia, Kemp ordered most state agencies last summer to reduce spending by 4% during the rest of this fiscal year and 6% in fiscal 2021, which starts July 1.

Speaking before Dorfman on Tuesday, the governor praised department heads for coming up with innovative ways to meet his budget-cutting targets, including consolidating space to reduce rental costs and merging programs now handled by two agencies under one agency’s umbrella to eliminate duplication.

He cited the Georgia Department of Corrections for saving $16 million in overtime costs through more efficient scheduling.

“We’ve shown taxpayers we are good stewards of their hard-earned money,” Kemp said.

The budget review hearings will continue through Thursday, with the full General Assembly returning to the Gold Dome next week.