Yes, expecting parents in Georgia can now claim their embryo as a dependent

“In the state of Georgia, House Bill 481 recognizes the fundamental truth, life begins at conception,” said Cole Muzio, president of the conservative Christian lobbying organization Frontline Policy Action and a backer of the legislation that created the new law. “And so we recognize that throughout our code. That means that a woman, as soon as she’s pregnant, can begin claiming that child on her taxes as a dependent.”

Speaking at the conservative Christian Family Research Council’s 2022 Pray Vote Stand for Life Summit in Atlanta last week, Muzio said such provisions are an important public relations component for the movement.

“That’s an important thing, as you’re talking about messaging, we truly value life as a state, as a people,” he said, panning Democrats who opposed the bill. “The idea that we would give pregnant women some tax relief was so repulsive to them, that we recognized the personhood of the unborn, that they wanted to rip just that provision out of the bill. We need to make sure people know that and are aware of that when we’re talking about these things, we are authentically, pro-life, pro-woman, and that carries forward in everything we do.”

Democrats say the sweeping changes could have unforeseen consequences.

“When you are going to start to equate a fetus with a person that is born in the personhood clause, as exemplified by this claiming of a fetus on tax returns, it just opens up a huge host of very thorny questions, constitutional questions, freedom of movement questions that we just haven’t even begun to scratch the surface of, much less answer,” said Atlanta Democratic state Sen. Elena Parent. “This is really a byproduct of the rushed process to pass that legislation.”

One such unanswered question is how much income tax revenue the state will forego because of the new deduction.

An analysis of the potential cost was not done when the bill passed in 2019, but at the time, the bill’s author put the price tag at about $10 million to $20 million annually.

In Georgia, about 122,500 babies were born in 2020, according to the March of Dimes, but now embryos and fetuses that don’t survive the pregnancy can also be claimed as dependents. The state might ask tax filers to provide “relevant medical records or other supporting documentation ” to prove they are eligible for the tax deduction, but the Department of Revenue has not yet clarified which specific records might be requested.

“I would say that’s true of any tax deduction or tax credit is if you want to claim it, you have got to be prepared to show that you deserve it,” said Kyle Wingfield, president and CEO of the Georgia Public Policy Foundation. “It’s certainly more intimate than whether you bought a house or something like that, but from the standpoint of having to provide documentation, that’s just kind of an expectation with any deduction or credit.

“I can see why people might think about this differently, but I would say it’s more similar to other deductions and credits than not,” he added.

Who benefits? It’s complicated. 

For all its complexity, the new deduction may not deliver much money back to Georgia parents, says Richard C. Auxier, a senior policy associate with the Tax Policy Center, which is a joint venture of the Urban Institute and the Brookings Institution.

Once this year’s income tax cut is fully rolled out and coupled with a new higher standard exemption, a single filer in Georgia will need to earn at least $12,000 to benefit, and a married couple will need to earn at least $24,000, Auxier said. And the threshold to benefit will increase the more children a couple has.

“When a state has these policies in place, if you want to provide assistance to certain families, you have to realize that a deduction will not (help) families who have already been helped by existing parts of your tax code,” Auxier said.

“And so this new policy will not be benefiting many people, specifically, many lower income households, because they’ve already benefited from other policies. The only way to help those families who have relatively low income who are benefiting from these policies is to enact a refundable tax credit. Because while a deduction can only reduce your taxable income to zero, a refundable credit, if it’s larger than what you have left, you can get that as a credit.”

Auxier gave the example of a married couple with two children and another on the way earning $30,000.

That couple will list their income and work their way down the tax sheet. Because they’re a married couple, they subtract their standard deduction of $24,000. The deductions for their two older children will cancel out the balance before their third child is factored in, he said.

“So now they have $6,000 in taxable income. Then it says ‘Do you have any dependents?’ They say, ‘Well, we have two,’ and they say multiply that number times $3,000. That’s $6,000, so now, subtract that from your taxable income. Now we’re at zero.”

The state’s new and lowered flat income tax rate means the deductions won’t mean much to any filer, Auxier said. The rate would flatten and drop to 5.49% starting in 2024 and eventually shrink to 4.99% over time, assuming state revenues continue to grow.

“It’s a $3,000 deduction. That’s not a $3,000 check to a person, it’s not a $3,000 benefit,” he said. “It’s lowering your income by $3,000, so you calculate the benefit by saying, hypothetically, what if I didn’t have that deduction? What would I have paid in tax, and using the flat rate, that’s going to come in, with a little simple math, you can calculate that you’re saving $150.”

Wingfield with the Georgia Public Policy Foundation said the limited impact of the new deduction for expecting parents highlights a perk packed into this year’s tax cut bill that was aimed at lower earners, with lawmakers rolling taxpayer deductions into a higher standard exemption.

“If we’re talking about a deduction, and you’re saying, ‘Well, people who are already exempted from taxes won’t benefit from this.’ Well, yes, because they were already exempted. So that’s almost like complaining about a tax code that has already been intentional about trying to be fair to people on the lower end of the spectrum.”

Tax policy is inherently complicated because modern families often do not look like the stereotypical nuclear family, Auxier said.

Often, a child will receive the majority of their financial support from one parent but live with the other, or be cared for primarily by a grandparent, aunt or uncle.

“You have to ask questions like, ‘Do you have children?’ And then you have to also ask, ‘Do you support the child? Who pays for the children’s house and housing and for the children’s food? How many months of the year does a child live with you? How many months a year does this child live with their grandparents, live with the other parent?’”

“To do this with an unborn child becomes even more complicated,” he said. “Because it’s only with the mother, but that does not mean that the mother is providing the support for it, it could be coming from someone else. So does it depend on who’s supporting it, or is this solely for the mother? If it’s solely for the mother, you can imagine if the mother is not working either because of the pregnancy or because she’s a student, or just because she’s unemployed or whatever, but she’s getting financial support, how do you then apply the deduction to the person that’s delivering financial support to the unborn child?”