Georgia has consistently made the list for the top states for business. It has landed the number one spot for the 12th year in a row, according to Area Development Magazine. The state shines in areas like economic growth, infrastructure, and business perks, and state leaders often tout this. But other rankings tell a different story depending on what they measure: CNBC ranks Georgia sixth giving it an “A” for doing business, noting strong points in workforce and economy but gives Georgia an “F” for weak spots in quality of life and business costs; Forbes ranks Georgia in sixth place, noting high business costs and mediocre quality of life, and Site Selection magazine places Georgia in second place.
One glaring reality undercuts the praise: Georgia has the second-highest income tax rate in the Southeast. Eliminating it could quash many of these criticisms, starting with the cost of living. In the end, Georgia isn’t number one across the board, but it holds a solid spot as a strong player in the region—and going tax-free could elevate it further.
Georgia’s overall cost of living index sits at roughly 9%-11% below the national average. Hotspots like Atlanta have a much higher cost of living than the state average, up nearly 20% since 2020. Doing away with the income tax would put $2,000 to $3,000 back in the pockets of middle-class families each year, according to Tax Foundation estimates. To make this a reality, Lt. Gov. Burt Jones formed the Georgia Senate Special Committee on Eliminating Georgia’s Income Tax, saying: “Last year alone, nine states cut individual income taxes, and three others cut corporate income taxes,” emphasizing the need for Georgia to eliminate the income tax to remain competitive. He went on to say, “In fact, among southeast states, only South Carolina currently has a higher income tax rate than Georgia.”
Georgia shines in certain areas—such as recent strong job gains, its role as a logistics hub (home to the world’s busiest airport and the inland rail ports), and big tax breaks for large companies. Still, critics point to problems like the cost of living, high property taxes, and traffic jams. In 2018, the Georgia General Assembly passed tax reform to gradually bring down the income tax rate to 4.99% by 2027. Even still, the current tax rate ranks the third highest in states with a flat rate.
Critics of eliminating the income tax say that this policy might hike sales taxes to make up for a nearly $20 billion deficit—and that sales taxes hit lower earners harder. They also warn of short-term hits to education and health care if growth lags. But proponents point to real-world fixes and note that Georgia is sandwiched between two states, Florida and Tennessee, with no state income tax, that both have thriving economies. States like Tennessee prove that this model works: After phasing out its tax in 2021, unemployment fell to 3% and the mean wage was up nearly 5%. Florida kept its sales tax at a flat rate of 6% and still saw living costs stabilize as population booms brought more competition. When Tennessee scrapped its state income tax, it used the growth to fund tax-free holidays for groceries.
The senators on the committee have pushed to slash tax breaks for big corporations to offset the cost of eliminating the state income tax without raising the sales tax rate. Currently, the combined local and state sales tax averages at 7.44% with the state only taking in 4% of the sales tax. Special Committee Chairman, Sen. Blake Tillery, noted during the October meeting that Georgia gives over $30 billion in corporate welfare in the form of tax credits and tax exemptions. As an example, there is currently no cap on the film industry tax credits. Georgia lost $10 billion in revenue during fiscal year 2022 due to some of these tax breaks. Sen. Michael Rhett voiced this concern: “I would like to make sure that the amount of funding we’re going to let go is the same amount we’re going to receive.”
Legislators in the Georgia House of Representatives and the Senate largely advocate for a consumption tax and have emphasized areas where revenue can be created, such as taxing the sale of lottery tickets, as they are currently exempt. Other goods and services in Georgia that are exempt from taxes include: tattoos, piercings, use of tanning beds, storage unit rentals, parking spaces, repair labor or installation labor, and yacht part refitting. Sen. Greg Dolezal remarked during the August committee meeting that North Carolina was “outrunning their need for revenue with growth,” the more they lowered their income tax rate. The potential growth flips the script on revenue woes. Just like in Texas, where no income tax helped fuel a $2 trillion economy, Georgia’s income could swell from new shoppers and tourists.
These tax breaks will be meaningful for Georgians across the board. A Gainesville woman, Carli Jones, discussed how much her family spent on diapers and formula each week. She emphasized in her testimony before the Special Committee in October that eliminating the income tax “can mean the difference in saving for our kids’ future and something else.” In the same meeting, firefighter Riley Shoemake said, “When you’re making money and your paycheck can’t help your family as much as it should be—that’s hard.”
As the Senate committee nears its December wrap-up before the legislative session begins in January, legislators are optimistic that new growth from no income tax will pay dividends. Eliminating the income tax won’t fix everything overnight, but it could make Georgia cheaper to live in and easier to thrive in—turning cost complaints into comeback stories. For now, it’s a high-stakes plan with plenty of lessons from the neighbors already cashing in.