Ways & Means Income Tax Subcommittee 2.4.26

Hey. Good afternoon, everyone. We're gonna call the income tax subcommittee, the ways and means committee to order now that chairman Blackman graces with his presence. And, first up on the agenda today is house bill eight eighty by committee substitute that chairman Blackman's gonna present to the committee. So y'all get some good questions ready.

You all be going out.

Chairman, what mic are you on?

Why don't you let the others go first, and then I'll just go last because I've gotta be here anyway if I'm just changing.

That's fair. That's fair. If, that's fair. Chairman Martin, you ready? What mic are you at, please?

I

got your coin of central. Yeah.

4. Alright. He he can drive that. Alright. Chairman Martin.

Thank you, mister chairman. I have, house bill 962 l c sixty one zero two ninety seven. This bill deals with the, five twenty nine plans, that folks can, put money in to save for college. We have one, I think it's called the, in Georgia, the path to college plan. I think we we call it the Georgia pathway plan sometimes, but I think the the name is path to college.

But what the bill seeks to do is, take the cap off on on lines nineteen and twenty. There's a $235,000 cap. Right now in state code, it says for per beneficiary, but there's actually a question of of that cap actually aligns with federal law right now. So, we suggest that we remove that cap and let the reasonable maximum be determined by the board. There's a board that does this, and, they can decide what we allow to go in the Georgia plan.

That's the first change. The second change is I I thought, when I send out the form, I had no no opposition. Full disclosure, the, somebody came to me, less than an hour ago, and and, it seems that the state treasurer is trying to be protective of his, monopoly in May. But what I'm seeking to do is give the state tax income tax deduction to a family if they participate in a valid five twenty nine plan anywhere that's approved by, the federal government. Because, I mean, if we've heard nothing around here the last few years, it's college debt.

We wanna you know, we've got a needs based program from the governor coming. I mean, we wanna try to help people, pay for their college. So the suggestion here is to let them have the income tax deduction regardless of what plan and encourage people to do that. I understand when the plan started and it was new, we wanted to give them an advantage because the plan had no money in it and, you know, you wanted to give people reason to to invest in the Georgia plan. That plan now has almost $6,000,000,000 in it.

It. The fees that are made from the plan are are fair. I would say the plan gets a good return. So this bill just simply allows Georgians to make decisions. Consumer's choice bill, I think it will encourage more savings for college, doesn't change the annual, contribution limit.

So what what you got here is an opportunity to let the board set, the limits for the Georgia plan, and then you have the option for people to use a different plan if they choose and let the Georgia plan compete. If it's the best one, for a family in Georgia, they can use it. If they wanna go with the Utah plan, another one that's that's known that's run by the state of Utah, it's known to be a a stellar plan. They can do do that and get the Georgia, tax deduction. Just real quick, mister chairman, the difference between getting that deduction and not getting that deduction over an eighteen year period, say the babe you know, the child's born, you start doing that.

If we force people and they wanna invest in a plan and we don't give them the tax benefit because we we wanna hold them capital captive in our monopoly, could cost them $12,000 over the course of an eighteen year period at a 5% return. So I just feel like that's a bit unfair. I I get why it was done originally. I don't question that. I don't question the valid value of our current plan, but I'm willing to let consumers make the choice and and suggest we treat everybody equal.

Thank you, mister chairman. I I do trust your math on that, but, I've just, asked the members of the committee if they have any question. By the way, to the audience and to the members and the author of the bill, this is hearing only. All the bills today are that have not been heard before hearing only. First hearing only.

So got any questions? What number? What number? Just eight. Alright, representative.

Thank you, mister chair. Thank you, chair Martin. I just wanna make sure. So basically, what we're doing is just giving, reduce getting rid of the limit that we have, 235,000, just letting, someone else make that decision based on, letting the board make that decision on what it should be. Is that correct?

Yes, sir. At one time, that's the way it was. The the board, they typically set that to the, cost of attendance of the most expensive call, education, in that you can get in Georgia over a four year period. That's that's what it was done in the past. And and this is for our plan only.

There are plans across the country that have unlimited amounts that go into them. But right now, our folks can't use those plans because, they don't get the tax deduction if they do.

That's the question. Any other questions from members of the committee?

I've got I've got a

I've got a question. I have participated. I have two kids that have gone to University of Georgia and participated in 05/29. Why do we even have a cap? I mean, is that necessary to even have a cap on what we can invest?

Because everybody wants to invest as much as possible. And, you know, if you have good investments, you get good returns. And if they don't they don't use it, they could use it for their kids or, graduate degrees, what have you.

If if it'd be

the wisdom of the committee for us to just remove the cap altogether, I I I don't object to that. And the reason we placed the reasonable language in there is to let the board determine that.

Right.

I believe in the past that was done because there was a tax deduction, you know, being given for that. But but I would, again, point out that the way our code reads, it says no additional contributions may be made to a savings account where the total balance of all accounts for a beneficiary equals or exceeds 235. Well, the in in practice, there's no way to know for a beneficiary because I could start account for a child and the child would be the beneficiary. You could start account with that same child and we we can check for one plan, but we can't check if there's another one in another state. So in practice, it it it's I won't say it conflicts with federal law, but it's a little bit different.

So I would not object to removing the cap in its entirety, but I'd leave that before the, the committee for discussion.

Alright. We got a microphone eight. I'm not sure who that is.

Oh, you didn't turn it on.

Okay.

He didn't turn

it on. Alright. So does any members of the committee have further questions? I I've I've got one question, mister chairman. Help me understand on line 29, for alright.

Going back '24 for tax bill years beginning on after, 01/01/2026, an amount equal to the amount of contributions to a qualified tuition program established and maintained by state or agency or an instrumentality thereof, which is exempt from taxation pursuant to section fifty five twenty nine internal of internal revenue code on behalf of the I'm sorry. Exempt from taxation on behalf of the designated beneficiary, but not exceeding $4,000 per beneficiary. Does that mean they can only give, I mean, only don't give $4,000?

No. So that means all that that's the only that's the limit Georgia would let them, reduce their income tax.

Okay. I've got you.

Yes, sir. So that that was something, I have heard that that there may be interest in in changing that also this year, but I I can't represent that today. That that's, coming from another place in the building here. But that and the reason all that language is is is the language that's being stricken is the our account defined in Georgia code. So we're strictening that and saying any account approved nationwide, which our our account is our our program is as well as many, many more.

I mean, Fidelity has them. T Rowe Price has them. You the different states have them, and and so forth. So we just wanna make that a consumer choice bill. And, again, what we've heard in this committee, what I've heard in my committee in higher ed, more more money, that we can allow folks to save is good for us in the water.

Thank thank you, chairman Martin. We do have one person who's signed up to speak against the bill, and it's, Bethany Wet Wetzel or Wetzel? Wetzel. Wetzel. Ready.

For the office of the state treasurer. And, if you'd where is our testimony? Yeah. Right here. So with this mic on, and if for the record in the microphone, if you just, tell us who you are and who you're with and which position on the bill is, please.

Great.

Thank you, chairman. My name is Bethany Wetzel, and I'm with the office of the state treasurer. I'm the treasury program director. And I also have Scott Austison today here with me today. He's the deputy straight state treasurer and chief investment officer.

One of the privileges I have, at working for the office of the state treasure is overseeing this Georgia's higher education savings plan, the programmatic part, and Scott oversees and, does oversight for the investment portion. So appreciate the opportunity to speak. Appreciate the recognition that the cap needs to be removed currently. We currently, have the lowest maximum account account balance limit, in the nation, so this is definitely a change that needs to happen. I will speak to the question about whether the cap can be removed.

IRS regulations require that it be set, that there be a cap on the amount, and it the general language is actually what the language is in the bill right now. It has to be a reasonable amount as determined by the base based on current and anticipated education expenses. Expenses. So that language is very appropriate. We do have concerns about tax parity, as how it would affect the Georgia Higher Education Savings Plan, and our account holders.

Currently, we are able to offer the lowest cost play, cost plan in the nation. Our average, annual asset based fee is nine basis points. The average, annual asset based fee for an adviser sold plan is 84 basis points. So we are, really pleased to be able to offer that, and hopefully offer more, break points and fee reductions as we grow, and get bigger. Another thing is that the plan was specifically created for Georgians in mind.

Our focus is Georgians. 91% of our, account holders live in Georgia, and, every decision that is made by the board is with Georgians in mind. Our board was created with, excellent oversight, which was recognized by our ratings agency, Morningstar. We actually have the highest ranking for our parent oversight, and, the governor is the chair. We have the chancellor of the Board of Regents, the commissioner of the Technical College System of Georgia.

We have the president of the Georgia Student Finance Commission. We have the state auditor, the tax commissioner, and, citizen members. And then that knowledge of different varying, k through 12 and higher education expenses, really helps us in the knowledge of Georgians as well, helps us create a plan that is specifically meant for them. We are concerned that Georgians will be aggressively marketed by adviser sold plans, and then we'll end up not spending more on a plan bate because the the fees are higher. So, for that reason, we are concerned about tax parity, and we're happy to answer any questions that you may have.

Does anyone have questions? Well, I've I've got one. I'm I'm gonna recognize you in second, as the author of the bill. The the the benefit of, and we have a concern for Georgians, but if if you allowed this, tax benefit to, be available to a Georgia Georgian using an out of state 05/29 plan, it it still benefits the Georgian. And I would guess that it probably more than offsets any extra fees that, you know, that Georgia may choose in a plan out of state, would it not?

Have you done the math on that?

Yes, sir. I would be specific and say for those people who have accounts now, so say in the Georgia our pathologist program, they choose to go to a national program, they would possibly be better off. There are a lot of reasons why they might go. Fidelity might be something that their family adviser uses for other accounts. So I think on a personal basis for individuals, we would agree that there may be reasons, particularly for the higher net worth individuals who would say, my adviser prefers to have a path to college funds that's with Fidelity or Vanguard or whatever, and it might be easier to roll up.

And whatever extra cost there might be of a different fund because we are the lowest cost in the country. But nonetheless, for an individual, there may be very compelling reasons for them to do that. One of them, by the way, would be the cap because our cap is the lowest. There may be families that would rather be in a different $5.29 program because they're limited, by the cap. So section one, we would totally agree with by increasing the cap, it would reduce the likelihood that the higher wealth individuals, the those with higher limits higher amounts in their accounts that have reached the limit, they would like to be able to stay in Path to College.

Some of them probably stay because of the tax benefit. As we've heard, there are probably some folks who have multiple Path to College accounts, and that is problematic from a record keeping perspective. So we would agree that raising the cap would be very helpful. Back to your question, mister chairman, about the overall program. When we're talking about the program, we're talking about those folks who are remaining in the program.

So if the high net worth individuals and others choose to go to other other five twenty nine programs nationally, that's very good for them. But we do have a concern that if the assets under management, which are currently 7,000,000,000, we're one of the fastest growing in terms of both accounts and assets under management in the nation and have been for the last ten years. If those assets under management go down, it could impact our arrangement with the program manager, and it's a contractual arrangement. Currently, we use TIAF. There are break points, and every time we reach so for example, when we reached 7,000,000,000, we went down to a lower break point.

So we actually paid two basis points to the program manager. We anticipate that we will continue to grow and get that down to one basis point. That's one of the concerns that we've expressed. So we're really talking about those participants who continue to be in the Pathway College Fund and those future folks who would like to be in the Georgia Pathway College Fund who would be harmed only in the sense that they would not benefit from a reduction in fees based on the assets under management.

But, again, I'm gonna speak to the fact is is the is is only Georgia taxpayers making that decision, and they would have the benefit of being able to and it's their money, and why not let them go wherever they want to at the end of the day? And then we're gonna make sure we're running our fund just like everybody else is trying to, you know, perform the best it can. I'm I applaud it. 6,000,000,000 is great in nine basis. You said nine basis points points gross.

And that includes the fund fees. I I apologize. So the actual program fees are four basis points, and then we have fund fees. So the different funds have charges. And so what we're giving you is the all in cost is nine basis points.

And when, path of knowledge funds or sorry. When five twenty nine c funds are scored from a cost perspective, they look at both the management fees and also the underlying fund fees. We have excellent funds that also are very low cost, mostly index.

And we're

the number one rated in the nation?

We're the lowest cost.

Lowest cost. But it's probably what about performance? So Overtime.

So we we are meeting benchmarks as far as growth and, in performance. And in by our our the the organization that rates plans, Morningstar, we are a silver, plan. We actually increased our new miracle score this year where we are only, point zero eight points from becoming a gold, rated plan. So there are currently, I believe, six gold rated plans in the nation that have diff all different, fund managers.

Yes, sir.

And may if I may just make clear that there's nothing that prevents any Georgia resident from going to any five twenty nine plan now. It's just if they don't use the Georgia five twenty nine path to college fund, they don't get the benefit of, say, 400 or $800 for the tax. That's all we're

And to the chairman's point over a given period of time, he just described it could be $12,000 disadvantage to that Georgia taxpayer whom we're Yes. Absolutely.

Absolutely.

Serve. So

Cumulatively, yes.

I'm gonna recognize, representative Kelly for a question.

Thank you, mister chairman. Thank you all for being here. Thank you for the work. Sounds like y'all do good work. I don't think anyone's here disputing that with y'all.

States that offer a state administered plan and the tax benefit that goes along with it, how many of them allow you to also use an outside brokerage?

Seven states have offer what is called tax parity. There every state in the nation has a direct sole plan. 11 states have no income tax. A lot well, not income tax, but have do not have a deduction either because they have no income tax or because the legislature has not decided to agree with that. And then there are only seven states that offer tax parity, which is what this bill would change to.

How do those seven states' performance and cost structure compare to y'all's?

So, the the performance of the growth rates of those states is is is lower than the performance of our state. I believe our growth rate our year over year growth rate for last year was 13%. The average over those states with parity was around, eight or 99%.

And cost structure?

So we are again, we're the lowest cost plan in the state I mean, in the nation. So of those

All more expensive.

Were less.

So They're

all more expensive.

Correct. Yes, sir.

Thank you. K. I'm gonna recognize, chairman Martin for a question.

Yeah. Well, first of all, I wanna repeat what, representative Kelly said if I can. I have no problem with the plan. I have no problem with their cost structure, but I also have no problem with with competition. And and I can give you an example.

My plan has been open for my grandchildren, for about four I'm sorry. It's about six years. I opened it, you know, I think when they were three or four. So it's been open about six years. It has a cumulative return of a 100%.

So I I could I could afford to pay a few more basis points because I don't think your cumulative return over the last six years has been I'm not and I'm not saying you're a bad plan, but I'm just saying people ought to be able to choose. That that's all I'm trying to do here. And and and honestly and and we we talked earlier, and and if you'd have come and talked to me more than thirty minutes, we'd had a a more cordial conversation when I I told you, you know, Steve shouldn't have sent you over here. You mentioned the governor was on your board. Your your treasurer sent a bill over here a couple of years ago to remove the governor from your board and and put the state treasurer on on the board.

So I I worry a little bit about, you know, collecting up a bunch of power and stuff like that. I'm I'm sorry. You're doing a great job, but I am just flabbergasted at why you're bothered by letting parents choose what's best for their investment. I I understand he sent you over here. I understand he sent you over here.

I wish he would come by my office and explain to me that because it just it doesn't make sense to me. Now I wanna get to the the numbers because that's what, chairman William's son is is interested in. What concerns me about this is the opportunity to have that. Of course, you're growing more than tax plans with parity because people you're the only game in town to get the tax reduction. You know, representative Kelly asked you if you were growing more than them, and you you asked you how you compared to them.

You said you were growing more than them. You didn't say their your returns were better. They may be, but but you didn't say they were. Of course, you're growing. I I had you at 6,000,000,000.

You said 7. That's awesome. Part of that's return and part of it's because you're the only game in town. And for you to sit there, in my opinion, and talk about enough people leaving this plan to somehow hurt your basis points tells me you're not running a really good plan. Because if that many people wanna leave, you don't have a really good plan.

Now I'm gonna go the well, let me go the other way. I'm gonna I think you've got a good plan.

Let's take let's take it down a notch

then. No.

No. I am. I'm well, I'm I'm going back to this. I think you're running a good plan. I don't think you're gonna lose a lot of people, so I don't think we're gonna we're gonna hurt you.

So I just I I just want them I just want consumer choice. I want you guys to to do what you're doing for Georgia, and I just want people to have the opportunity to do it elsewhere if they choose. Many people will not.

Thank you, chairman Martin. Any more questions for members of the committee from members of the committee? Hearing none, this was a a first hearing only. Thank you for the input. Thank you for the good job y'all are doing, and thank you for being open minded and remembering that they were trying to serve Georgians first.

So thank you for the work you're doing.

Thank you.

We're gonna have the next bill. We're gonna hear house bill ten seventy. Representative Hagen chairman Hagen. Are you with the witness mic? Okay.

That's perfect. Okay.

Does this work?

That's working. Perfect.

Is

it okay for me

to be here? This first No.

That's fine.

Time I presented in ways and means.

So I don't

I know you'll have your ways.

Okay.

So just wanna make sure I do this correctly. Thank you,

mister chairman and members of the

committee. Members of the committee. Just to clarify, I've got l c 394886. And, so the the railroad track maintenance tax credit, which only applies to class three railroads, was enacted in 2018 to accelerate rail infrastructure investment and promote economic development, and that is is particularly impactful in rural Georgia. We need it because of the high infrastructure cost of maintaining rail.

Every mile of rail on a short line cost that railroad from 10 to $22 no. Back up. $2,020,000 dollars per mile annually to maintain that rail. And if they have to install new rail, it's about $3,000,000 currently for every mile that they install. So tax credits needed, in my opinion and in theirs.

But why the short lines are important particularly? And, I do chair rural development committee. I do represent a very rural part of the state. The direct economic impacts of these railroads is about 10 to $22 per dollar of tax credit they receive. So there's a higher return on investment, but the indirect economic impact is possibly just as important because that's not included in that 10 to $22.

But for a community that needs to grow and bring in new investment in investment dollars by way of industry and manufacturing, frequently cannot do that without a short line rail. And so it's highly impactful in many rural communities. Not to mention the growth of our port in Savannah that we know is coming, and, these short lines play an important role in moving that freight out of the out of the port into, other parts of the state. So what this bill would do, it again, it only applies to class three railroads. It simply extends extends the current tax credit sunset to five years to 2032.

And we're also looking to increase the credit per mile from 3,500 to 5,000. And that is that is the entirety of the bill.

And as I recall, representative Patty Bentley carried this bill in 2018. And it it is I'm gonna take a chairman's moment and say that I know how important short lines are because many, many, many small towns, small businesses would not have access to rail were it not for our short line railroads. That being said, is there any questions for members of the committee? Chairman Carson. Grab one.

What's that number?

Chair Buddy, thank you for bringing this. I'm just wondering, has there been a fiscal note performed to this, or is it in process?

We have one from OPB, and it is for 6,000,000, let me look at here. $6,000,000 approximately annually.

Every fiscal year starting in '27?

That that was for this year.

Okay.

That's for this year.

Mister chairman

I have that right.

I understand. Mister chairman, if I may are there speakers for and against the bill coming up? I was gonna ask.

There are. Okay. Thank

you. Mhmm.

Okay. Any more questions from members of the committee?

I have no

hold on.

I hear it. Representative Buckner.

I may not be reading this right, but on line 29, it talks about 12/30/2031. And then and you mentioned that it would go through '32, and then now on '35, it's 01/01/2032. And I'm just wondering if all of these dates are I'm trying to read quickly and see if they're matching up or if there's a because the year ends on December 31 instead of '30.

I guess we're not working on New Year's Eve.

I don't guess so. I don't

guess so. Anyway

to both of us. Yeah.

Yeah. But

I don't I can't answer that.

That that's a good question, but it

I mean, I don't

Those are the established dates. We're just adding five years to to to each one.

Just how do you know if they need to do that?

Chairman Williams. Got a question? No. No. I'm sorry.

Alright. Sorry. How do I make that go off? Okay. We have several, speakers signed up to speak for and against the bill.

Justin Strickland, signed up. If you come tell us who you're with. Witness witness microphone right here, please. Just this will be recorded for for if you would, just, state your name, who you're with, and your position on the bill.

Mister chairman, thank you. Justin Strickland with Omnitrax, here, for house bill ten seventy.

Any any comments on the bill?

Yes, sir. Excuse me. I'm glad to be here today to share with y'all a little more about Short Line Railroads. Glad to to make it here in time today, finding out about this meeting at 10:30 this morning. I had my steel toed boots on, meeting with a customer, who's looking to set up a new operation in Albany, Georgia where I live on our railroad to move a lot of heavy products on rail, that in my feeling should move by rail and not by truck.

But they do, pave the roads that got me here in about three hours today in time for this meeting. So glad to be here and appreciate your time. OmniTrax operates four railroads in the state of Georgia. We operate the Georgia and Florida Railway, which originates in Albany. We operate the Fulton County Railway, which is in the city of South Fulton.

We operate the Georgia Woodlands Railroad, which is in Washington, Georgia, And we operate the newest short line railroad in Georgia, the Savannah Industrial Transportation Line, which is in Rincon. So a lot of different commodity mixes, a lot of different areas of Georgia where we move products by rail. Omitrack spent over $11,000,000 last year maintaining rail, and that allows us to provide a safe operating environment for our employees and our customers to receive freight by rail. This tax credit allows for us to provide continual reinvestment in a permanent infrastructure. Rail moves a lot of freight, moves a lot of goods across the great state of Georgia.

Serving those customers as a short line rail, sometimes can be very marginally thin business for us. But we like to do it safely. We like to do it efficiently. We like to keep trucks off the road, move things, that are that are heavy. Like I said, that I would rather my my wife and 16 year old daughter who's a new driver this year not have to drive next to those on the interstate when they're going somewhere.

We have a question from representative, Newton, chairman Newton.

Thank you, mister chairman. Thank you for your your work and your company's work. I do think, as you say, getting these off the

Yes, sir. We had a

a fairly long truck wait discussion a few years ago discussing the pressure on our bridges and our roads and the the replacement rates and all. I'm just curious about one thing in line 31 I'm sorry. It is 35, I guess. It's it's the transferability, the assignability one time. Do you these companies, I guess I've been always more in favor of ones of companies that made a profit in Georgia and needed these income tax reductions themselves.

Do you know are most of these transferred, or or do you have an idea? Or is it just the excess amounts transferred, against versus what income tax the the entity may have made or owed in Georgia?

Yes, sir. Mister chairman, there are some years where we do transfer the credits. There are some years where we do claim them. Just depends on our income tax liability during that

operating year.

Narrow margin business.

It Thank you.

Do we have any other questions from members of the committee? I just

have Chairman Martin. I to be look. I don't wanna be that guy, but I'm I'm gonna ask because this this is a tax credit. Right?

Yes,

sir. So one of the things that that would not questioning the value of it, but we're we're moving the the value up and the tax rate down. So the the numbers at $3,500 at a 6% income tax rate, that's that would have gotten rid of in income tax on $58,333. That's how much the the $3,500 tax how much tax you would have paid that you don't have to pay because you have 35. Moving it up to 5,000 at 4.99, that that number goes to a $100,200.

And and do you I

mean, is that what you need in order to to make it work for you? I mean, I'm just I mean, I'm you don't have to answer that on the record, but I just realize it's almost doubling the effective value of that credit to you. And we wanna help the business, but we're real remember there's a budget. Right? So I will put you in spot and ask you to answer that question.

But just keeping in mind that because our income tax rate's going down, you know, the the credit's infinitely more valuable, you know, as it approaches zero. So I appreciate you, dude. I'm not gonna labor any more time with it, maybe catch you offline, but just to make sure we've hit the right spot.

Okay. Any more questions from members of the committee? Alright. We have a couple of more people. I think we're gonna hear very similar stories, but we'll we'll call real quickly on Joseph Santoro.

So if

you can I'll be fair to brief. Fair to brief.

Well, thank you, chairman, committee members for the opportunity to join you today. My name is Joe Santoro. I'm the executive director of the Georgia Transportation Alliance. We are the transportation arm and affiliate of the Georgia Chamber. We have members across the transportation industry, but with today's conversation, we'll just focus on our, railroad members, and that includes both class ones here in the state, as well as over half of the 26, short line class three railroads in the state.

Just to say that we're in full full support of this, legislation, house bill ten seventy. And that as we know over the next twenty five years, we do a lot of data forecasting. We know the freight tonnage is gonna nearly double, if not more, by then. And making sure that these investments and these tools are in place is critically important. So, thank you so much.

Thank you. Any questions from members of the committee? If you're hearing now, we're gonna hear from Ben Wright of Georgia Railroad Association.

Thank you, mister chairman, members of the committee for allowing me to testify today in support. My name is Ben Wright. I'm with the Georgia Railroad Association. We represent around 26 short line railroads across the the state as well as the two class one railroads located in Georgia. And, we operate around 1,000 short line railroad miles across the state and then a little over 3,500 class one miles across the state.

We just wanted to sit down here today and give you our support for the legislation. Thank you very much.

Any questions? Alright. We're gonna hear from Craig Kamas come Craig Kamisa. I'm sorry. We've never seen

There she is.

Mitch Kamisio.

Thank you, Chairman Williams. Hey. I'm I'm Craig Giamuso. I'm with CSX Transportation. CSX has has been mentioned as a class one railroad.

We operate about 1,800 miles of track in the state. And, again, along with Norfolk Southern, we make up the two class one railroads. Here to support the bill, this is not a bill that CSX receives a a direct benefit from. However, if you think about the railroad network in Georgia and the two class ones, think of Norfolk Southern and CSX as the I 85 and I seventy five of the state and the short lines as the exit ramps, for the state. We connect with, all of our short lines between us and and NS.

And, as was mentioned by Justin, one of the most capital intensive industries in the nation. So the cost of material, continues to rise. The ability as, as representative Hagan said, the ability of these short lines to be able to maintain customers in these rural towns. These short lines were developed. Really, short lines came about from from lines that CSX Norfolk Southern weren't able to really service.

So because of these, without the short lines, a lot of these companies would not be in business, and a lot of these people would not be employed. So we very much in in favor of the bill, and we appreciate your time. Chairman Williamson.

Mister Calusa. Any questions for members of the committee? Alright. Chairman Carson.

Mister Calusa, thank you for being here. Many times we ask in regard to these tax credits and and these deductions and exemptions, if not for this, what would happen? So my question, Craig, was if we did not have this credit, what would happen with these short lines? Would the cost of goods just be more expensive and they would be delivered? Or what what if we let's just and I'm not proposing this to the author, but I'm just saying if the credit were not there at all Right.

What would be the impact on

these I think the impact would be that some of these short lines would shut down because they don't have the ability to invest. I mean, the cost of investment is getting higher and higher each year. And without this, you look at the stats, the amount of investment that has occurred in the short line industry from 2018 till to 2025 has been I I wanna say it's increased by about 200%.

What are those maintenance costs? Is it clearing trees? Is it new gravel? Is it new cross ties?

All the

above? Yeah. Great question. This this goes into to ballast, gravel, cross ties,

new rail. Ballast. I'm sorry.

You Ballast is rock rock that's below the, so you have you have your rail, you have your cross ties, and then you have the ballast, which is the is the rock. Right. Right. That's that most of the investment goes into that, but also and what it is is become very expensive is the maintenance of bridges. So those bridges are are pretty cost a pretty penny for especially for the short

line community. K. Any more questions? Again, this is a hearing only, but you did a great job. And, chairman, hey.

I wanna thank you, for all your work for Rural Georgia. You've done yeoman's work or your lady's work, And, we appreciate you bringing this measure out. We it's a proven successful model, and, we will have a second hearing on this, I assure you. So thank you. I'm sorry.

Is it I'm sorry. Chairman Blackman, you have a question?

Well, just before chair lady Hagan leaves, I I I think this has probably come up before. But just to remind everybody, I think this is an original recommendation from the rural development council, chaired co chaired by chairman Powell and chairman England from several years ago. So this extends something that that they found very important and integral into their rural development plan, I think, from from years back. Yeah. I

I know for a fact that many small businesses wouldn't not even start were it might be not for these short line railroads. So, we've gotta support them at some level because they do have a a tremendous impact in the smaller towns. So thank you again. Alright. Next, we'll hear chairman Blackman's, bill, which is, he's gonna substitute the house bill eight eight zero.

Chairman Blackman.

Thank you. Mister chairman, members of the committee, bring before you house bill eight eighty, which kind of falls in line with, what we we passed on income tax reform and reduction several years ago. With existing benchmarks, it takes, would take the rate on down in increments of a tenth of a point to, three nine nine from where it currently is. It actually also raises the standard deduction by 3,000 and the dependent deduction by a thousand in those same divided increments.

Can you point us to the lines on the bill? Point us to the lines on the bill.

The rate reduction on page two, line 24. And then when you look at what it does for the standard would be on page the excuse me, the dependent deduction on page three, starting in line 51, I believe, and then, once again for, for our our married down on 65. Perfect. And then I think it's single on line 70. And then you'll see the rewrite of, what was already in the the original legislation.

Then on lines 97, you'll see that the senior, exemption goes from 65 to 70. And then, on the final page, it, takes the revenue shortfall reserve fund, up to as much as 50% of the previous fiscal year's net revenue and allowing half of that, enabling, I should say, permissive, half of that to be used for taxpayer relief. In a nutshell, that's the bill. There's a a couple of supporting letters included. I know we had a fiscal note.

David, you're saying that, they got misplaced and mislabeled. So, you know, generally speaking, you know, I I I know what the rate reduction would be, but we can we can get final numbers under this. The first hearing, we'll try to have those locked down by the next hearing if if that's acceptable, mister chairman.

And, chairman Blackman, just for clarity's sake, on line 97, you said we're raising from, you said for a senior deduction, you said from 65 to 70. Just want for clarity's sake, anybody might be watching the line. We're talking about from 65, not age, but we're raising it from $65,000, to $70,000. So it would not be true that if this, this particular line passed or signed by the governor, it would exempt a married filing. Any couple married filing jointly over 65 years old, it would exempt $140,000 of their Yeah.

It would exclude another 10,000 from Yeah. From income tax.

But in that example, would it'll be a $140,000.

Yes, sir, mister chairman.

Any questions from members of the committee?

Representative Butler.

I had a question about this last time, and it still it's looks like it's changed. On line 78, governor's revenue estimate for the succeeding fiscal year is not at least 3% above the revenue estimate for the present year. Now and that that was supposed to be one of our trigger points that we meet that. So what was the situation for us this year with our revenue estimate from the governor?

You'd have to ask the governor. No. I think I I think what we've seen is that the the structural surplus is what we've heard with regards to to how that rate has been accelerated, if that's what you're referring to.

Right. I mean, because it's in law that we're gonna do that, but it seems like we haven't done that the last time and or this time.

I think part of it is is the, taxpayer relief fund as well as, you know, kind of speaks to that a little bit when you have a surplus and you're, you know, you have a a structural surplus in place and you're able to, you know, utilize what what is already there to to roll back those those dollars that belong to the taxpayers to begin with.

Well, I understand that. I have a problem I have a problem with it feeling like we're breaking our own rules, our own law.

Well, I think it's just based on the economic success and you know?

But you understand what I'm saying. We've got in in here that this this must happen for us to do that, but it didn't happen when it we did it last time, and it doesn't look like we're it could happen in this time.

Well, what we don't have in there is that if we have, you know, exceedingly wording? I'm sorry?

Can we not fix the wording to make it be what to reflect what we're really doing?

Well, I guess we could say that if if you have, a a structural surplus in excess of that, you know, that we can roll back taxes any amount, but I I think that's relegated to the general assembly regardless. So, people drop bills all the time that cut taxes, so I imagine that that's available to that's tools to us as legislators regardless.

Okay.

But thank you for the question. I mean, that has helped me out. Really, but okay. Thanks. Alright.

So, miss chairman has just a quick question.

Okay. Is

it not true that even with the tax cuts, our revenues have continued to rise on income taxes? So although we cut taxes, individual tax rates, we're still exceeding the revenues year over year. And I understand the lady's question, but the fact of the matter, we got a plan that's prudent, thoughtful. We've enjoyed tremendous economic success, and we're just trying to do the right thing by taxpayers by leaving more money in the hard work in Georgia's pockets. Is that not true, mister chairman?

That that's true. Again, what I meant by structural surplus, I think, is what we've heard. Yes, sir. And, again, I appreciate the work, that the Public Policy Foundation, and then we have a letter from the NFIB as well, in support. So

Chairman Martin, did you have a wrap up question?

I was just I agree with I mean, I'm gonna, of course, agree with our big chairman here. I I think when the government governor's doing that, the what he keys in is when he budgets money from the revenue shortfall fund to for the to give the taxpayer relief that he may include that in in the revenue estimate. That's money we have collected from the taxpayers in a different fiscal year.

Thank you. Any member any questions for members of the committee? If you're in I'm sorry. Do we have another question? Chairman Carson.

It's not a question. I just wanted to say thank you to the chairman because the change on line one twenty nine, I could tell you from my whole time on appropriations, that's been necessary going from 15 to 50% allowed from the prior year's revenue to go into the what we do it's actually called the rainy day fund. That's thank you for making that change. Thanks, Sharon. Alright.

This is hearing only and in no other further business coming before the income tax subcommittees income tax subcommittees of the ways and means committee stands adjourned.