ATLANTA — An income tax cutting proposal designed by Georgia's Senate Republicans to address the election year affordability issue would also cut into the supply of new housing for low wage earners, potentially harming some of the same people it would help.

Senate Bill 476, approved by the Senate last week, would return billions a year to taxpayers, and it would pay for that by reducing and then eliminating some $30 billion in tax credits and exemptions.

A chunk of that money goes to developers as a match that doubles the value of federal credits to build apartments that rent at below market rates. The credit gets paid over a 10-year period, so developers with newer projects would see their balance sheets go from black to red as they lost future credits that helped to make those projects feasible.

That would mean less housing for restaurant workers, school cafeteria employees and janitors, said Ken Blankenship, a developer who taps the credits.

"Where is that money going to come from? I'm not going to put it in. I'm going to foreclose on the property," he said. "It is a financial disaster for our industry. Now, you take my deal and multiply that times 50 or 60 deals that are under construction right now," said Blankenship, who is president of the Georgia Affordable Housing Coalition.

Lawmakers established the credit in 2000. A 2022 review of the program requested by the state Senate estimated that developers would claim $331 million in credits in fiscal year 2023 alone.

A summary of the review by the Department of Audits and Accounts said projects financed with the credits produced an estimated 19,500 jobs, mostly in construction, that paid about $1.7 billion in labor income. The summary also said much of the economic activity would have occurred without the tax giveaway. It noted, though, that "existing research has pointed to personal and public benefits from safe and secure long-term housing."

The credit is only for below-market rental properties where a substantial portion of the renters earn 60% or less of the median income.

Under SB 476, the state tax credit would drop to half the federal credit in January before being abolished in 2032.

Blankenship said that in addition to bankrupting some developers in the near term, the loss of state funding would cause a long-term slowdown in construction of housing for people who struggle to make ends meet.

Those are the same people that Sen. Blake Tillery, R-Vidalia, said he wanted to help when he crafted SB 476, which he likened to a pay raise for the middle class.

The legislation would use the revenue saved from tax credits to increase the state income tax standard deduction to $50,000 for an individual and $100,000 for a married couple, up from the current $12,000 and $24,000.

"I stand with those families making less than $100,000 and a yes vote fully supports them," Tillery said Thursday on the Senate floor before the measure passed, mostly along party lines. He said firefighters, teachers, lunch counter workers and janitors would benefit the most.

The downsizing of the state subsidy would come amid an abiding shortage in affordable housing that a leading economic forecaster expected to endure at least through this year.

"Activity is depressed because affordability is at record lows, few people are desperate to buy or to sell, economic uncertainly is high, and almost nobody's moving," said the 43rd annual economic forecast by the Selig Center for Economic Growth.

The report by the Center, based at the University of Georgia's business school, said construction finances were squeezed between two federal policies: elevated material costs due to tariffs and a labor shortage due to stricter immigration enforcement.

"Since we do not expect these negative factors to change very much in 2026, the homebuilding and real estate industries will remain in recession," said the report, released late last year.

It is unclear how far the Senate will get with its tax cutting proposal. To become law, it would need approval by the state House and then by Gov. Brian Kemp.

The House has its own tax-cutting proposal focused on local property taxes. Kemp wants to reduce the income tax rate a fifth of a percentage point to 4.99%, which is something SB 476 also does.

But the governor proposed neither increasing the standard deduction nor cutting tax credits to pay for it — both cornerstones of the legislation.

Kemp's state economist, Robert Buschman, was asked about approaches to reducing the income tax during a legislative budget hearing in January. Buschman praised Kemp's approach of slowly lowering the tax rate based on "structural" revenue surpluses, but he also said culling ineffective tax credits to pay for continued lowering of the rate "would be a wonderful thing."

He did not specify whether any particular credit, such as the affordable housing credit, was ineffective. But he was the lead co-author of the 2022 state review of that credit.