The special session on tax reform is underway at the State Capitol and Gov. Jeff Landry is encouraging lawmakers to pass all his bills to revise the state’s tax code. Landry’s proposal will reduce individual and corporate income taxes while expanding sales tax to more goods and services.
“As you go through each one of these bills, remember they are collectively tied to each other. When you pull a string out of one, you gotta remember you’re gonna have to pull a string either out of another one or either add a string to both,” said Landry.
On Thursday, the House Ways & Means Committee passed HB 1 to lower personal income taxes and HB 3 to eliminate corporate franchise taxes, advancing them to the House.
HB 1 simplifies the tax structure to a flat 3% tax rate for those who make more than $12,500 a year. The current rate is 3.5%t for salaries between $12,500 and $50,000. And 4.25% on incomes above that.
HB 3 eliminates the corporate franchise tax. The theory is that residents will have additional income and more businesses will come to and/or stay in Louisiana.
Landry told members of the House Ways & Means committee that because the state’s tax code hasn’t been revised since 1974, they have a historic opportunity to make generational changes for Louisiana.
Lawmakers are also hearing testimony from various interest groups on how the plan to reduce Louisiana’s individual and corporate income taxes could negatively impact the state. Jan Moller, executive director of Invest in Louisiana worries the state budget won’t be able to address the shortfall even with the additional taxes on 42 services.
“And when all the math is done you’re going to end up with about $742 million less in revenue than you get right now, that’s money you’re not going to have available to meet the needs of the state,” said Moller
Moller says the majority of the state’s budget goes towards Medicaid and education.
A Public Affairs Research Council nonpartisan analysis of the sweeping tax reforms indicates lower wage earners would have $224 more annually in income. Rep. Matthew Willard (D-New Orleans) says that’s not enough.
“I would argue that if somebody is making $25,000 to $30,000 they need a lot more than $224,” said Willard.
The budget shortfall will be made up by adding sales tax to 42 services currently untaxed like lobbying and landscaping.
The session is expected to end on or before Nov. 26.
A list of proposed additional services to be taxed is available on the Legislature's website.
