Committee members on Monday reviewed five bills sponsored by state Rep. Richard Nelson, R-Mandeville, that work together to eliminate the state’s personal income and corporate franchise taxes and shift the tax burden to property and sales taxes over the next four years.
The intent, Nelson said, is to make Louisiana more competitive with states like Florida and Texas that have no personal income tax as a means of reversing the trend of residents and businesses leaving the state over the last century.
“I think this would make some good progress in actually moving forward,” Nelson.
The bills are contingent on House Bill 414, a constitutional amendment that would prohibit exemptions allowing local governments to override a 3% sales tax cap through statute while increasing the state sales tax from 4.45% to 6.25%. The bill would also reduce the homestead property tax exemption from about $75,000 of property value to $25,000.
HB 414, which would require voter approval if passed by lawmakers, would also eliminate the Industrial Tax Exemption Program to increase revenues by about $1.3 billion per year, Nelson said.
The changes would be phased in over four years, allowing local governments to switch from renewing sales taxes to a property tax millage. The changes to the homestead exemption would increase the property tax burden by about $568 a year for the average Louisianan. Currently, roughly a third of residents don’t pay property taxes because of the exemption, said Nelson, who clarified that special property tax freezes for retired or disabled residents would remain intact.
“In some parishes up to 80% of the property is untaxed” because of the homestead tax exemption, he said. “Looking at reducing the homestead exemption to put it more in line with what other states have I think that is one of the most important ways to broaden the (tax) base. It raises about $500 million.”
“We have to be careful we don’t throw a burden on those lower income folks,” said Rep. Les Farnum, R-Sulphur.
Other bills considered implements aspects of Nelson’s plan in statute, including HB 363 to phase out the corporate franchise tax and associated deductions and credits; HB 423 to increase the sales and use tax and expand services taxed to mirror Texas; HB 424 to phase out the personal income tax and credits and deductions; and HB 437 to implement a flat rate corporate income tax of 5%, instead of the current tiered tax of up to 7.5%.
HB 424 also eliminates some corporate income tax credits to offset the cost of reducing the tax.
All of the bills are tied to the passage of HB 414, and they’re all supported by the Pelican Institute. HB 424 is opposed by Together Baton Rouge, while HB 23 is opposed by the Louisiana Hospital Association and other hospital groups.
All of the bills were voluntarily deferred on Monday to give lawmakers more time to review the proposals.