Folks are typically thinking about summer travel or last-minute beach holidays this time of year. But in Georgia, lawmakers have something else in mind: Eliminating the state’s income tax.
While Georgia is already on a set schedule to gradually reduce its income tax rate over the next several years, a recent announcement by Lt. Gov. Burt Jones’ office has stirred discussion about eliminating the Peach State’s income taxes — permanently.
“If we wish to remain the number one state for business and keep our state competitive, we must expand on the progress made over the past four years to eliminate Georgia’s income tax,” wrote Jones in the press release.
Yet while Georgia and other southern states cut their tax rates this year, some studies suggest reductions in state income taxes could disproportionately affect certain taxpayers more than others.
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Here’s what to know.
New income tax law in Georgia and ‘end to income taxes’ proposal
Lt. Gov. Jones has created a bipartisan state Senate committee that will discuss potential ways to eliminate Georgia’s income tax. State lawmakers will meet several times in the coming months.
However, along with issuing rebate checks, Georgia has already cut its income tax rate this year. The rate dropped from 5.39% to 5.19% in 2025, following an earlier reduction last year.
- Each subsequent year, the rate will decrease by .10%.
- The final flat income tax rate of 4.99% could be reached by 2028.
However, the final rate reduction will not be as low as some neighboring states. While Florida and Tennessee have no state income tax, North Carolina’s flat rate is just 4.25%.
By the time Georgia reaches 4.99% in 2028, it’ll be barely below Alabama’s top rate of 5%, and about 1% less than South Carolina’s. Yet that’s assuming neither of those states cuts income taxes.
This year alone has seen six southern states reduce income tax rates, and Lt. Gov. Jones’ plan may have sparked discussion in yet another about reducing state income tax.
South Carolina, Louisiana, and other southern states cut income taxes
Several news outlets are reporting on the possibility of Alabama cutting its income tax rate after Georgia lawmakers announced their plan to consider eliminating the state’s income taxes.
However, the elimination of the Alabama income tax may be unlikely.
The Cotton State recently allowed its state’s ‘no tax on overtime’ exemption to expire due to budgetary concerns. A complete elimination of Alabama’s income tax would cost significantly more in state revenue.
But just because Alabama isn’t getting an income tax rate reduction, doesn’t mean other southern states aren’t getting one this summer (or have already received an income tax rate reduction in 2025):
- South Carolina temporarily dropped the top marginal income tax rate from 6.2% to 6% in July. Further cuts are possible.
- Louisiana switched to a flat income tax of just 3% in 2025.
- Mississippi, too, reduced its flat income tax to only 4.4% with another cut planned for 2026.
- Missouri cuts its top income tax rate by .10%, with future reductions planned.
- North Carolina lowered its 2025 flat rate from 4.5% to 4.25%.
- West Virginia dropped its top income tax rate from 5.12% to 4.82% this year.
Note: Kentucky will lower its income tax rate on January 1, 2026. Similarly, Oklahoma will receive an income tax cut of .25%.
What are the negative effects of tax cuts?
The ‘cutting state income tax’ trend might come at a price. According to the Center on Budget and Policy Priorities, lower income tax rates can lead to state budget cuts in key areas, like education, healthcare, and infrastructure.
- In an analysis of 26 states that cut income taxes between 2021 and 2023, the Center reported a 3.6% drop in state revenue, an amount equivalent to more than a third of what the states’ general fund spent on higher education.
- Rate cuts in states like Arizona, North Carolina, and West Virginia were particularly large, potentially shrinking the general funds of those state budgets by 11% over five years.
- Overall, permanent rate cuts were reported to be “especially harmful” to state balance sheets compared to temporary or one-time tax cuts.
Tax rate cuts may also disproportionately affect low-income households that rely more heavily on state-funded public services.
However, supporters of income tax rate reductions argue that they increase state competitiveness and attract more businesses to the area. More money in residents’ pockets might also encourage increased spending in the local economy.
Georgia Sen. Blake Tillery (R-Vidalia), chairman of the Senate committee on eliminating the state income tax, has announced plans to file legislation to phase out the Georgia income tax. The committee is expected to release its recommendations by December 15, 2025.
But whether Georgia residents will see an elimination of state income taxes remains to be seen.