The Senate Revenue and Fiscal Affairs Committee today approved a tax reform package passed proposing to reduce individual income tax rates while repealing deductions for federal taxes paid and enacting triggers for future tax cuts. The measure was already passed by the House.
According to Louisiana Illuminator, HB278, co-authored by Sen. Bret Allain, R-Franklin, and Rep. Stuart Bishop, R-Lafayette, passed the committee in an 8-1 vote with just Sen. Karen Carter Peterson, D-New Orleans, objecting. It is the statutory version of individual income tax reform and was passed along with its companion legislation, HB274, the proposed constitutional amendment that will allow lawmakers to enact their new tax policy.
The bill repeals excess itemized deductions and the federal income tax deduction currently allowed on state individual tax returns. Because Louisiana residents get to subtract what they pay in federal taxes from what they pay in state taxes, the more they pay in federal taxes, the less they pay in state taxes and vice versa. Lawmakers expect getting rid of the deduction to make the state’s revenue more predictable.
In exchange for losing those deductions, residents in each of Louisiana’s three tax brackets would see reduced state income tax rates:
• From 2% to 1.85% on the first $12,500 of net income.
• From 4% to 3.5% on the next $37,500 of net income.
• From 6% to 4.25% on net income in excess of $50,000.
HB278 also includes a tax cut trigger that would automatically reduce future tax rates if the state experiences economic growth at a certain threshold and if the state’s “rainy day” fund is at a certain balance, Allain says. Read the full story.