Tax break for seniors advances

ATLANTA - One of Gov. Sonny Perdue's top legislative priorities moved a step closer to becoming law Thursday when a House committee approved a bill to gradually eliminate state taxes on retirement income.

The legislation, a follow-up to a senior tax relief measure that took effect last year, would fulfill a campaign promise the Republican governor made to elderly voters last fall.

The bill, which now moves to the full House, would phase out state taxes on retirement income for seniors 65 and older, starting in 2009. The exemption would start at $65,000 and increase annually until 2013, when the tax would be abolished entirely.

Lower amounts of retirement income already are exempt for seniors 62 and older under the earlier law, which the General Assembly enacted in 2003, Perdue's first year in office. The exemption cap began at $25,000 last year and will rise to $30,000 this year and $35,000 in 2008.

Rep. Rich Golick, R-Smyrna, the governor's floor leader in the House, pitched the new bill as a way to use surplus revenue the state expects to generate to reward Georgia taxpayers who for many years have paid taxes into the system.

But Golick said the tax break also would boost the state's economy by persuading more seniors either to remain in Georgia after they retire or to move here.

"For every person who is here, approximately three jobs ... are created,'' he told members of the House Ways and Means Committee. "That's the lifeblood of our economy.''

The bill is projected to cost the state $142 million a year when it is fully implemented.

Testimony earlier this week to a Ways and Means subcommittee raised concerns over whether future surpluses would be enough to offset that impact.

"We'll be eliminating almost one-fifth of the tax base,'' said Alan Essig, executive director of the Georgia Budget and Policy Institute. "We're talking about a real budget hit down the line.''

During Thursday's debate on the bill, freshman Rep. Stacey Abrams, D-Atlanta, argued that the $142 million price tag doesn't take into account the additional costs of health care the state would absorb from an influx of senior citizens, even the affluent retirees the bill is designed to lure to Georgia.

"High-wealth seniors typically don't take out long-term care insurance or have catastrophic health insurance,'' she said.

Rep. Virgil Fludd, D-Fayetteville, questioned the lack of any provision in the bill for income that retirees earn, an omission that has lent ammunition to charges that the legislation is a tax break for the wealthy.

The 2003 law allows seniors who remain in the work force to exempt up to $4,000 in earned income each year, but this year's bill is limited to retirement income, including pensions and investments.

Golick said one goal of Perdue's bill is to influence Georgians to save money during their working lives by making investments.

"Right now, we're a debtor society,'' the floor leader said. "This measure provides an incentive for people to save ... so they can protect themselves upon retirement.''

In response to Abrams, Golick predicted that the legislation will generate more money for the state than it will add in health-care costs.

"I feel very confident in saying it will more than pay for itself,'' he said.