BATON ROUGE (AP) — Louisiana legislators are once again discussing a possible path toward eliminating state income tax.
Lawmakers acknowledged, during Tuesday’s tax-writing committee meeting, that proposals to rid income tax is bound to meet massive fiscal hurdles, but others say it is necessary to help keep and attract residents, businesses and corporations to Louisiana. Republican Rep. Richard Nelson, who steered the conversation, described an overhaul of the state’s tax system as a “mousetrap” — allowing it to compete with states without income tax, such as neighboring Texas, that have seen faster and more significant growth.
“When you look at the state and you look at the trajectory that we’re going, I think the tax structure in Louisiana is one of the fundamental things that’s holding us back,” Nelson said during the House Ways and Means committee meeting.
Revamping the state’s complex tax code is likely to face fiscal and political challenges, considering personal income taxes are expected to raise $4.3 billion of the state’s $39 billion annual operating budget.
If income tax is removed, lawmakers will need to figure out how funds would be replaced — whether that means increasing sales and property taxes or reducing exemptions. Subcommittees will be tasked with conducting an analysis of the state’s tax structure, looking at what exemptions and credits are costing and what other taxes can be afforded to change.
Debbie Vivien, Chief Economist for the Legislative Fiscal Office, cautioned that it may not be the time for an immense change.
“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,” Vivien said.
Eight states — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming — do not have personal income tax.
“Texas, our neighbor to the west, grew six times faster than we did. Florida is about the same," Nelson said. 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."
Last year, Louisiana voters approved a constitutional amendment that decreases the maximum individual income tax rate from 6% to 4.25% beginning next year.
The Louisiana Legislature can tackle tax issues during odd-numbered years. The Ways and Means Committee is expected to make recommendations for tax structure changes to the Legislature for the 2023 regular session, which begins April 10.