4.10.21 – (The Center Square)
“Tax reform” means different things to different people, but a lot of people across the political spectrum seem to think Louisiana needs it.
As usual during odd-numbered years, the regular legislative session that starts Monday is focused on taxes and spending, though lawmakers can propose up to five nonfiscal bills each.
The Democratic governor, however, professed his willingness to work with the Republican-majority Louisiana Legislature on “real tax reform,” as long as the proposed changes are expected to bring in about the same amount of money as the current system.
“The package as a whole needs to be revenue-neutral,” Edwards said. “What we can’t do right now is create another structural budget deficit,” which is how he described the budget situation he inherited when he took office in 2016.
In a letter signed by the top two legislative leaders in each chamber, plus the chairs of the two committees in each chamber that handle state finances, all Republicans, lawmakers pledged to “fundamentally change our tax structure.”
“The focus of our tax reform efforts will be stability, simplicity and predictability,” the letter read.
Eliminating the state’s deduction for federal income taxes while reducing individual and corporate income tax rates, reducing and simplifying the corporate franchise tax, and phasing out the property tax on business inventory are among lawmakers stated goals.
At the top of that agenda, House Speaker Clay Schexnayder said, is centralizing state sales tax collection. Louisiana is one of only three states without a centralized collector, which makes life hard for business owners and managers who operate in different jurisdictions, business advocates said.
Local officials long have resisted a state takeover of sales tax collection, saying local control helps ensure taxes are spent the way local taxpayers and voters want them spent. Rather than letting the Louisiana Department of Revenue handle collections, Schexnayder’s bill creates an eight-member commission evenly divided between representatives of state and local government to oversee collection.
The change would require a state constitutional amendment, which means it would need the support of two-thirds of the members of each chamber and a majority of voters.https://66d8c3729468c3926a8d577fcdd45b98.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
One question sure to be raised: what happens when the state and local representatives are deadlocked 4-4? Like any proposed legislation, the speaker’s centralization bill is subject to change as it moves through the process.
“Many of these bills already have amendments in the queue,” Sen. Mike Reese, R-Leesville, said while chairing a meeting of the Louisiana Tax Institute.
Many of the bills filed before the session have identical or similar goals but go about it in different ways. Tax legislation that will be considered during this year’s session include, but are not limited to, the following:
• House Bill 36: Reduces the annual cap on the amount of motion picture tax credits that can be claimed in a given fiscal year from $180 million to $80 million;
• House Bill 43: Exempts steam, water, electric power and natural gas used in manufacturing from the 2% sales tax charged on utilities;
• House Bill 114: Constitutional amendment to phase out the business inventory tax over four years;
• House Bill 160: Expands the types of investments eligible for the state’s Angel Investor Tax Credit;
• House Bill 171: Scraps the three current individual income tax brackets in favor of a single 4% rate on net income above $12,500;
• House Bill 199: Creates the State and Local Streamlined Sales and Use Tax Commission;
• House Bill 202: Calls for a constitutional amendment to require a two-thirds vote of each chamber to create a new tax break, as is currently required to eliminate a tax break;https://66d8c3729468c3926a8d577fcdd45b98.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
• House Bill 206: Requires state income tax rates and brackets to be provided for in law, rather than the constitution, and eliminates the mandatory deductibility of federal income taxes paid when computing state income taxes;
• House Bill 207: Requires state income tax rates and brackets to be provided for in law, rather than the constitution, and eliminates the deductibility of federal income taxes paid when computing state income taxes;
• House Bill 208: Repeals the federal income tax deduction for corporations;
• House Bill 209: Replaces the five corporate income tax brackets, ranging from 4% to 8%, with a flat 5% rate;
• House Bill 210: Replaces the five corporate income tax brackets with a flat 3% rate;
• House Bill 233: Establishes a flat 3% personal income tax rate while eliminating the deductions for excess federal itemized personal deductions and federal income taxes paid and increases the value of the earned income tax credit;
• House Bill 274: Removes sales tax brackets from the state constitution so lawmakers can provide for them in statute. Limits the mandatory deductibility of federal income taxes to corporate income tax;
• House Bill 275: Eliminates the mandatory deductibility of federal income taxes paid when computing state corporate income taxes;
• House Bill 279: Phases out the corporate franchise tax over five years beginning in 2023;
• House Bill 292: Repeals the deductibility of federal income taxes paid for purposes of calculating corporate income taxes;
• House Bill 293: Collapses the state’s five corporate income tax rates, which range from 4% to 8%, into a single 6% rate;
• House Bill 299: Increases the value of the Earned Income Tax Credit from 5% to 10%;
• House Bill 305: Levies a state ad valorem property tax of 100 mills on the dollar of assessed valuation and provides for the assessment and collection of the tax;
• House Bill 369: Constitutional amendment calling for a flat individual income tax rate, which the Legislature would establish in statute, and eliminating the mandatory deduction for federal income taxes paid for purposes of computing income taxes;
• House Bill 376: Establishes a flat individual income tax rate of 4%, modifies income tax credits and deductions and eliminates the federal income tax deduction;
• House Bill 441: Strikes references to the maximum income tax rate from the constitution and calls for lawmakers to establish rates by statute;
• House Bill 444: Kills almost two dozen tax credits and exemptions;
• House Bill 448: Repeals state income taxes and limits the applicability of 14 state tax credits to corporation franchise taxes;
• House Bill 454: Reduces the value of 45 state tax credits, exclusions and deductions by 50%;
• House Bill 475: Phases out individual and corporate income taxes by the end of 2025 and repeals the federal income tax deduction;
• House Bill 486: Eliminates from the state constitution sales tax exemptions for food for home consumption, residential utilities and prescription drugs;
• House Bill 488: Changes the constitution to establish a maximum individual income tax rate of 4% while eliminating the mandatory federal income tax deduction;
• House Bill 489: Eliminates the business inventory tax;
• House Bill 504: Repeals the sales tax exemptions for gasoline, diesel fuel and special fuels; food for home consumption; residential utilities; and prescription drugs;
• House Bill 520: Phases out corporate income and franchise taxes over four years while repealing the corporate federal income tax deduction;
• House Bill 529: Applies the current top individual income tax rate of 6% to net income above $450,000 rather than $50,000, as under the current system, and establishes new high-end tax brackets of 7% and 8% for income over $500,000 and $1 million, respectively;
• House Bill 543: Repeals individual and corporate income taxes and the corporate franchise tax;
• House Bill 546: Calls for a single individual income tax rate of 4% on net income over $12,500 while increasing the personal exemption and standard deduction and for eliminating the deduction for excess federal itemized personal deductions and the deduction for federal income taxes;
• House Bill 547: Establishes a flat corporate sales tax rate of 3.28%, repeals the corporate franchise tax and federal income tax deduction and terminates several income tax credits;
• House Bill 605: Eliminates 50 sales tax exemptions; establishes a flat 2.97% tax rate on the sale, use, lease, or rental of tangible personal property; and levies a sales and use tax on 20 categories of services;
• House Bill 612: Eliminates 39 sales and use tax breaks;
• House Bill 615: Increases the per gallon tax on gasoline, diesel and special fuels; and levies an annual tax on electric and hybrid vehicles, dedicating the proceeds to the Construction Subfund of the Transportation Trust Fund, with priority given to funding eight “mega projects;”
• House Bill 629: Provides for on overhaul of individual income, corporate income, corporate franchise and property taxes;
• Senate Bill 11: Provides individual and corporate income tax deductions for state and federal COVID-19 benefits;
• Senate Bill 40: Proposes a constitutional amendment to allow parishes to tax motor fuels;
• Senate Bill 121: Allows parishes in which voters have legalized sports betting to levy a tax of up to $5 per wager;
• Senate Bill 158: Phases out the property tax on inventory by 2025, among other measures;
• Senate Bill 159: Reduces the top individual income tax rate from 6% to 5% and removes the federal income tax deduction from the state constitution.
David Jacobs is a Baton Rouge-based award-winning journalist who has written about government, politics, business and culture in Louisiana for almost 15 years. He joined The Center Square in 2018