BATON ROUGE, La. (BRPROUD) – Louisiana lawmakers are once again taking a look at doing away with the state income tax. Before legislation can be brought to the table, they’re researching how the funds can be made up elsewhere.
This is not the first time lawmakers have considered nixing the state income tax. But Rep. Richard Nelson, R-Madeville, is hopeful that an analysis of the state’s tax structure will help make a shift in the dropping population. He said the state’s complicated tax structure is holding Louisiana back.
The state individual income tax brings in over $4-billion of the state’s $39-billion operating budget. Louisiana also has one of the highest sales tax and one of the lowest property tax rates in some parishes.
If the income tax is removed, the money will need to be replaced. Whether that would be accomplished by increasing property taxes or reducing exemptions, the study group is going to consider it.
“Texas, our neighbor to the west, grew six times faster than we did. Florida is about the same. What do they have in common? They have no income tax. It’s one of the major things that attracts people from across the country,” Rep. Nelson said.
Economists are wary of such a big change right now. They believe it’s too soon to assess the degree to which 2021’s tax reforms affected the state. They also stressed that all signs point to a soon-to-dry-up well of funds supplied by the economic boost that gave Louisiana multiple surpluses.
“We’re seeing really high revenue, we know it’s probably going to come down. We have hurricane recovery, we have a lot of federal money being dropped in. We know it’s going to come down so we just caution you… if you’re tempted to cut just keep in mind we have a far way to fall at this point,” said Debbie Vivien, Chief Economist for the Legislative Fiscal Office.
The temporary half cent sales tax, which was implemented to help fix the last deficit, comes to an end in 2025 which will also need to be replaced. Vivien said following Hurricane Katrina the legislature made cuts when the economy was bolstered with federal funds, but as things crashed down after it made huge holes in the budget.
“The temptation is to just bring that to the bottom line of the general fund and say that’s where we’re going to be,” Vivien said. “But when you budget, you step back and you’re looking at the entire general fund. So it matters. It matters what’s happening and everything else, because it’s never static.”
The study group will look at what various tax credits and exemptions are costing the state as well as what other taxes can be afforded to change before official legislation is drafted.
The chairman anticipates holding meetings every other week leading up to next April’s fiscal legislative session.