The work to reform the state tax system, which has been going on behind the scenes for weeks, became public on Friday when Senate President Page Cortez released an announcement signed by the leaders of both chambers.
“In the next Legislative Session, which begins on April 12, we are working on a plan to fundamentally change our tax structure,” wrote the eight leaders in a community letter addressed to the “people of Louisiana”.
“We are looking to package up and come up with an initiative,” Cortez told reporters after Governor John Bel Edwards’ government presented the executive budget proposal from which lawmakers will build the state’s spending plan for fiscal 2022 which starts on July 1st, 2021.
Cortez said lawmakers want to create a simpler system that makes taxes more stable and predictable.
While facing a revenue deficit of nearly $ 1 billion, several state lawmakers are drafting legislation that would restructure the way L…
Governor John Bel Edwards said on Thursday at a city hall sponsored by The Advocate / The Times-Picayune that he is open to reforming the tax system, which could include reducing income tax bands. He added, however, that he would not allow any tax reform “to create that structural deficit that I inherited”.
Changes in the tax system between 2006 and 2008 effectively reduced tax collection. But lawmakers refused to make corresponding cuts in popular services, leaving the state government struggling to find enough money to pay the bills year after year. After a series of consecutive special legislative sessions, attended with often bitter rhetoric, Edwards and lawmakers raised sales taxes and made changes in fiscal policy to stabilize the state’s revenue picture.
Wall Street recently praised the efforts and improved the state’s credit rating.
The price of the Louisiana tax label seems quite high at first. But a series of exemptions, credits and deductions reduce what taxpayers owe to a very low amount.
For example, Louisiana’s personal income tax rates – from 2% for taxpayers to 6% for taxpayers who earn more than $ 50,000 a year – rank Louisiana 14th nationally. But after calculating the various tax incentives, the average amount paid by individual taxpayers makes Louisiana the ninth lowest.
One of these interruptions allows higher-income taxpayers, who file deductions on their federal income tax returns, to claim that amount and reduce what they owe to Louisiana.
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Only one other state allows a deduction for federal income tax deductions. Removing this tax cut, which will require a change to the state constitution, would allow the state government to raise hundreds of millions of dollars more.
Cortez said the money obtained from removing the federal income tax deduction can be used to reduce income tax rates.
Edwards said he is open to eliminating the deduction of federal state income tax deductions.
The idea of updating the state’s tax system, removing special interest exemptions and reducing overall rates has been on the table for years.
Early in Edwards’ 2017 term, a blue ribbon investigation task force – manned by economists, academics, analysts and bureaucrats – did a study and presented a checklist of recommendations for reforming the Louisiana system. None of these ideas gained enough strength to become law because several lawmakers complained that no budget cuts were included.
Still, the way Louisiana has collected and taxed over the years has been replete with dozens of new solutions, sought mainly by special interests, which reduce the amount of taxes owed.
For example, few states tax companies on the stock that companies have in hand. Louisiana, yes.
Inventory taxes, says the business community, prevent companies from moving here or expanding when they get here. It is also a major source of revenue for local governments.
A few decades ago, lawmakers created an alternative solution to the inventory tax. The local government could still collect the tax, but the state government would issue credits, essentially using state dollars to repay the business for what the locals collected.
Lawmakers want to eliminate property tax on company inventory. Cortez says this can only be done if another source of revenue is found for local governments.
Among the proposals that will be presented for debate, according to the letter:
• Centralize the collection of state and local sales taxes. Louisiana is one of three states where local jurisdictions levy their own sales taxes.
• Reduce and simplify the corporate franchise tax, which effectively charges companies for doing business in the state and calculated based on equity, rather than profit.