Proposal to eliminate state income tax in Louisiana shelved
Published 7:45 am Tuesday, April 18, 2023
By Jim Beam
Five tax bills that make major changes to state, parish and local taxes were heard by the state House Ways and Means Committee Monday. They were voluntarily deferred for more debate and final future committee action but some news reports said they were likely dead for the session.
Rep. Richard Nelson, R-Mandeville, is sponsoring the five measures. The key bill, which is a proposed constitutional amendment, is House Bill 414. It deals with property, sales and income taxes, the homestead exemption, the Minimum Foundation Program (MFP), and local education funding.
Nelson said the overall goal of his tax bills is to shift much of the burden for financing local government from the state to the local level. In order to do that, he is proposing to increase the property taxes that parishes and municipalities may levy with and without voter approval. That would help make it possible to do away with the state’s income tax.
Texas and Florida have no income taxes, Nelson said, and that has been a big drawing card that has increased their populations. Louisiana’s population increases have been low and Nelson said it lost its 8th Congressional District in 1990, its 7th District in 2010 and could lose the 6th District in 2030.
Members of the Ways and Means Committee expressed reservations about some of Nelson’s proposed changes but are apparently waiting until the bills resurface at a future committee meeting.
Nelson said his constitutional amendment will have to be submitted to the voters, so they would have the final word.
The present constitution says local government sales taxes are restricted to 3% but can be increased beyond that limit by state and local laws and with approval by voters. Nelson’s amendment proposal would eliminate those additional increases. However, the change wouldn’t affect higher sales taxes currently in effect until they expire.
The legislation would also do away with individual income taxes over a four-year period. It would also stop government funding of non-governmental entities.
Current law says property assessments have to be reappraised at least once every four years. The Nelson amendment would require reappraisals every year.
The proposed amendment would end the state’s Industrial Tax Exemption Program (ITEP) that gives local property tax exemptions. It wouldn’t affect current exemptions and it would become effective Jan. 1, 2024. The state’s inventory tax would be phased out over four years.
The $75,000 homestead exemption would be reduced over four years to $25,000. The $90 million annual Revenue Sharing Fund for local governments would be reduced to zero over a four-year period.
The bill also makes changes in the MFP that funds K-12 education by increasing the amount of local funding in the program. The proposed constitutional amendment would be submitted to the state’s voters on Oct. 14, 2023.
HB 363 by Nelson phases out the corporate franchise tax over four years.
HB 423 deals with state and local sales taxes and exemptions and exclusions from those taxes. It would increase the state sales tax to 6.25% beginning Jan. 1, 2027, while eventually keeping local sales taxes at a maximum of 3%.
HB 424 phases out the individual income tax that is also part of Nelson’s proposed constitutional amendment.
HB 437 changes the corporate income tax from graduated rates to a flat tax of 5% on Jan. 1, 2026.