Louisiana tax bills signed, but need voter approval in fall

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In this Sept. 8, 2020 photo, voting booths are kept socially distant at the Chesterfield, N.H. polling site. A majority of President Donald Trump’s supporters plan to cast their ballot on Election Day, while about half of Joe Biden’s backers plan to vote by mail. That’s according to a new poll from The Associated Press-NORC Center for Public Affairs Research that finds 54% of voters say they will vote before polls open on Nov. 3. (Kristopher Radder/The Brattleboro Reformer via AP)

BATON ROUGE, La. (AP) — Gov. John Bel Edwards has signed key pieces of a complicated tax swap plan to disentangle Louisiana’s income tax collections from federal tax payments, but it still needs voter approval this fall to take effect.

The proposal awaiting a decision on the October ballot would get rid of personal income tax and corporate tax deductions for federal income taxes paid in exchange for lowering the state’s income tax rates. Louisiana also would permanently eliminate the corporate franchise tax for small businesses and lower the tax rate for others.

The Democratic governor announced late Monday that he had signed the bills. But the package requires the constitutional amendment on the ballot to pass before the tax swap can happen.

Louisiana allows taxpayers to deduct the federal income taxes they pay from the computation of state income taxes. When federal income taxes go up, Louisiana collects less in state taxes. When federal income taxes go down, state tax collections rise.

The legislation would undo that link, a long-sought goal of tax experts, economists and others.

In exchange for losing the tax break, taxpayers would receive a 1.85% personal income tax rate on the first $12,500 of net income, down from 2%. The tax rate for the next $37,500 of income would fall from 4% to 3.5%, and the rate for income above $50,000 would drop from 6% to 4.25%.

On the corporate side, the proposal would scrap current rates that range from 4% to 8%. In exchange for the lost tax break, the state would charge companies a 3.5% tax rate on the first $50,000 of earnings; 5.5% on earnings above $50,000 and up to $150,000; and 7.5% on earnings above $150,000.

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