How Does the State of Georgia Make Its Money?

State governments require diverse financial resources to fund public services and programs. These services range from education and healthcare to transportation infrastructure and public safety. To meet these obligations, states establish a framework of revenue generation. This framework encompasses a variety of taxes, charges for services, and intergovernmental transfers. The collection and management of these funds enable a state to operate efficiently and address the needs of its residents.

Major Tax Collections

Individual income taxes are a substantial portion of Georgia’s revenue. The state has transitioned to a flat tax rate system, with the rate decreasing from 5.39% to 5.29% as of January 1, 2025, applicable to income earned in that year. This rate is set to continue declining incrementally, aiming for 4.99% by 2028. Furthermore, the dependent exemption for taxpayers has increased from $3,000 to $4,000 per dependent. Standard deductions have also been raised, reaching $24,000 for married taxpayers filing jointly and $12,000 for single filers, heads of household, married filing separately, and qualifying surviving spouses. Individual income taxes are a primary source of state funds, projected to account for approximately 47% of Georgia’s total state revenue for the current fiscal year.

Another significant revenue stream for Georgia is the sales and use tax. The statewide sales tax rate is 4%, applied to the sale of tangible goods and certain services. Local jurisdictions within Georgia can impose additional sales taxes, which can add up to an extra 5%, leading to a combined sales tax rate that may reach up to 9%. The average combined state and local sales tax rate currently stands at approximately 7.38%.

Use tax applies to purchases made outside Georgia where state sales tax was not collected, but the goods are used within the state. Businesses, including remote sellers and marketplace facilitators, are required to collect and remit Georgia sales tax if their gross revenue exceeds $100,000 or if they conduct 200 or more separate retail sales transactions within Georgia in the current or previous calendar year. Various counties across the state have also implemented sales and use tax rate adjustments, with some changes taking effect in April and July of 2025.

Corporate income tax contributes to the state’s financial health. Effective July 1, 2025, and for all taxable years beginning on or after January 1, 2025, the rate is set to decrease from 5.39% to 5.19%. This reduction aims to enhance Georgia’s attractiveness as a business location. Future contingent reductions could further lower the rate by 0.10% annually, starting January 1, 2026, until it reaches 4.99%, provided certain annual revenue targets are met.

Other State Taxes

Georgia collects revenue through several other state taxes. The motor fuel tax is levied on the sale of gasoline and diesel fuel. For 2025, the state excise tax rate on gasoline is $0.331 per gallon, while the diesel rate is $0.29 per gallon. These funds are often specifically earmarked for the maintenance and development of transportation infrastructure throughout the state.

Georgia also imposes excise taxes on specific goods such as tobacco and alcoholic beverages. The excise tax on cigarettes is $0.37 per 20 cigarettes, making it one of the lowest in the country. For alcoholic beverages, the liquor tax is $3.79 per gallon, and the beer tax is $1.01 per gallon, which includes a local tax component of $0.53 per gallon. These taxes serve a dual purpose: generating revenue for the state and potentially discouraging consumption of these products.

The insurance premium tax contributes to state coffers as well. This tax is imposed as a percentage of the insurance premiums collected by insurance companies on policies covering individuals, property, or risks within Georgia. Georgia uses this premium tax as an alternative to an income tax on insurance companies. The specific amounts generated from this tax vary by county.

Non-Tax Revenue Streams

A significant portion of Georgia’s revenue originates from non-tax sources. Federal funds and grants represent a substantial non-tax inflow to the state. These funds are allocated by the federal government for specific programs and initiatives, including healthcare services like Medicaid and PeachCare, various educational programs from Pre-K to higher education, and vital transportation projects. For example, Georgia received approximately $19 billion in federal funds for Fiscal Year 2025, with a portion of these funds, around $200 million, specifically supporting after-school programs.

The Georgia Lottery provides a substantial non-tax revenue stream, with all profits constitutionally dedicated to specific educational programs. These programs include the HOPE Scholarship Program, which assists students with higher education costs, and the statewide Pre-K Program, providing early learning opportunities for four-year-olds. In fiscal year 2025, the Georgia Lottery generated over $1.47 billion in proceeds for these educational initiatives. Since its inception, the Lottery has contributed more than $29.8 billion to education in Georgia.

Revenue is also generated through various fees, licenses, and permits issued by the state. This category includes charges for professional licenses, business registrations, and vehicle titling and registration. For instance, motor vehicle revenues, encompassing tag, title, and other associated fees, contribute to the state’s overall financial resources.

The state also earns income from investing its financial reserves and trust funds. This investment income is accounted for within broader categories such as “Other Interest, Fees & Sales” in the state’s financial reporting. Miscellaneous revenues also contribute to the state’s funding. These can include fines, forfeitures, and proceeds from the sale of state-owned property. Hotel and motel fees, along with collections from unclaimed property, further diversify these non-tax revenue sources.