Income tax

Louisiana lawmakers discuss eliminating income tax

BATON ROUGE (AP) — Louisiana lawmakers are once again discussing a possible path to eliminating state income tax.

Lawmakers acknowledged at Tuesday’s tax drafting committee meeting that proposals to eliminate the income tax would face huge tax hurdles, but others say there is a need to help retain and attract residents, businesses, and corporations to Louisiana. Republican Representative Richard Nelson, who led the conversation, described an overhaul of the state’s tax system as a “mouse trap” – allowing it to compete with states with no income tax, like neighboring Texas, which have experienced faster and greater growth.

“When you look at the state and you look at the trajectory that we’re on, I think the tax structure in Louisiana is one of the fundamental things that’s holding us back,” Nelson said at the House Ways and Means committee meeting. .

Overhauling the state’s complex tax code is likely to face fiscal and political challenges, given that personal income tax is expected to bring in $4.3 billion of the $39 billion annual operating budget. of state dollars.

If income tax is removed, lawmakers will need to consider how the funds would be replaced, whether that means raising sales and property taxes or reducing exemptions. Subcommittees will be tasked with performing an analysis of the state’s tax structure, examining the cost of exemptions and credits and other taxes that may be subject to change.

Debbie Vivien, chief economist of the Legislative Tax Office, warned that now may not be the time for huge change.

“We’re seeing very high revenue, we know it’s probably going to go down. We’ve got a recovery from the hurricane, we’ve got a lot of federal money coming in. We know it’s going to go down, so we’re just warning you… if you’re tempted to cut, keep in mind that we have a long way to go at this point,” Viviane said.

Eight states – Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming – have no personal income tax.

“Texas, our neighbor to the west, has grown six times faster than us. Florida is pretty much the same,” Nelson said. What do they have in common? They have no income tax. It is one of the main things that attracts people from all over the country.

Last year, Louisiana voters approved a constitutional amendment that lowers the top personal income tax rate from 6% to 4.25% starting next year.

The Louisiana legislature can tackle tax issues in odd years. The ways and means committee is expected to make recommendations on changes to the tax structure to the Legislative Assembly for the 2023 regular session, which begins April 10.