Sunday, July 21, 2024

Louisiana Legislature poised to adopt tax overhaul; voter approval needed

by BIZ Magazine

By David Jacobs | The Center Square

Louisiana legislators will enter the last day of their session Thursday poised to adopt a tax overhaul package many lawmakers consider this year’s top priority.

The House gave final passage Wednesday to four bills, eliminating some tax breaks, making another permanent and lowering income tax rates. Supporters hope the changes will make the state more attractive to businesses and residents while still collecting close to the same amount of money.

Gov. John Bel Edwards, a Democrat, has endorsed the Republican-led Legislature’s stated goal of broadening the tax base while lowering rates as long as the changes are “revenue neutral.” He has not taken a public position on the specific bills.

The Senate has given final approval to one of the four bills and likely is to sign off on the other three Thursday. Voters would have to approve changing the Louisiana Constitution to make it all possible.

Senate Bill 161, which has passed both chambers, makes permanent an exemption to the state’s corporate franchise tax on the first $300,000 of taxable capital, which would exempt most businesses. The rate would drop from $3 to $2.75 per $1,000 above that level.

Like with other bills in the package, rates would go down further if state revenue growth hits certain triggers and the rainy day fund is roughly two-thirds full.

Senate Bill 159 calls for the end of the constitutional guarantee that taxpayers can deduct from their state income taxes the cost of paying their federal income taxes. The unusual tax break ties the state’s tax policy to the federal government’s and could cause budget problems for the state if the federal government raises taxes.

While taxpayers would be losing a lucrative exemption, in return, the maximum state income tax rate would be set in the constitution at 4.75%, compared with the current top rate of 6%. The bill also would take references to the other tax brackets out of the constitution, allowing lawmakers to set those rates in statute.

That’s where House Bill 278 would come in. Current personal income tax rates of 2% on the first $12,500, 4% on the next $37,500 and 6% in excess of $50,000 would be reduced to 1.85%, 3.5% and 4.25%, respectively.

House Bill 292 would collapse the five corporate income tax brackets into three: 3.5% on the first $50,000, 5.5% on the next $100,000 and 7.5% on income in excess of $150,000.

The session must end by 6 p.m. Thursday.

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