As discussed in this space last week, there are two bills pending in the Georgia House and Senate that would create, for the first time, an Earned Income Tax Credit (also called a Georgia Work Credit). Each of these bills, HB 329 and SB 172 have had an initial hearing in the appropriate subcommittee and will now go on to further revision and hearings. The fate of these two bills is very important to us at St. Vincent de Paul Georgia.
For over 114 years we have worked to bring hope and help to our neighbors in need in Georgia; helping them to achieve stability and move toward self-sufficiency. In 2016 alone we provided over $15 million in financial, material, and educational support to more than 126,000 people struggling to find their footing after hitting a bump in the road. One of the services we provide is free tax preparation services (VITA) that helps ensure that low income working families have access to the federal Earned Income Tax Credit. We have seen, clearly and consistently, that our clients see a huge benefit from the earned income tax credit. Adopting a state match to that federal credit, as has been done in 26 other states, will further the economic benefits of this time-tested tax policy.
So we are very happy to see that HB 329 proposes the creation of a Georgia Work Credit, a state level Earned Income Tax Credit (EITC). But, we are concerned because the benefit of that tax credit could be offset by a significant burden working families will feel from a proposal in that same bill to shift Georgia’s income tax from a graduated rate to a regressive flat tax structure. This proposed change would shift more of the tax responsibility onto the shoulders of low-and-moderate- income Georgians, taxing this group further into poverty and erecting a structural barrier that may keep them from moving into the middle class.
We are concerned for a hardworking Georgian, just like someone we serve each day. A young man or woman without a high school diploma, putting in an honest day’s labor at minimum wage. Working full-time, that persons annual income is roughly $14,500. Under HB 329 as proposed, they might actually see a tax increase of about $130.
Georgia’s tax system already taxes low- and middle-income Georgians at a higher share of their income than it does of the wealthy. The poorest fifth of Georgia taxpayers currently pay about 10.6 percent of their annual income in state and local taxes on average, while the wealthiest 1 percent pay only 5 percent. Our graduated income tax provides a modicum of fairness to counteract more regressive levies such as sales taxes and fees. Moving to a flat tax would further entrench this upside down approach and significantly burden working families trying to climb into the middle class.
A second related concern we have with the flat tax shift is that it jeopardizes the resources Georgia needs to pay for important investments that serve all Georgians by weakening the state’s most reliable source of revenue.
In summary, we feel that a State EITC is a great way to support working families, but pairing it with a new flat tax is essentially giving with one hand, and taking away with the other. Everyone should carry their share of the load but a flat tax would ask the most from those with the least.