How will Louisiana taxpayers be affected if the so-called “tax swap” package becomes a reality?
NEW ORLEANS (WVUE) – A certified public accountant and the head of a budget watchdog says the so-called * tax swap * proposals that voters can weigh in the fall will not result in a strong Most people’s state lower income tax bill.
Before ending the 2021 ordinary legislative session on Thursday, state lawmakers have definitively approved a package of income tax reforms and voters will be able to decide on part of the constitutional amendment.
The legislation lowers personal income tax rates and the constitutional amendment that will appear in the October ballot would put a maximum cap on the income tax rate in the constitution.
In turn, state tax deductions that individuals and married couples receive for federal income taxes paid would be eliminated.
Richard Tullier is a CPA at Wegmann Dazet & Company.
“What it will do for most people, they may see a small drop in their tax bill, it won’t be dramatic, but it will be a drop in their tax bill. The people who will be affected the most will be those who have a significant federal tax burden, ”said Mr. Tullier.
Jan Moller is the executive director of the Louisiana Budget Project. He is concerned about the proposed changes to the tax legislation.
“Most citizens won’t see any significant change in their overall income bill and that’s frankly one of the two reasons we’ve had a problem with this is that it doesn’t solve the fundamental problem in our. tax structure in Louisiana. that is, low income households pay state and local taxes at a higher rate than people at the top of the income scale and that is because in Louisiana we are extremely high on sales taxes hit low and moderate income families the hardest and we are relatively low on state income taxes, ”Moller said.
On the last day of the legislative session before the vote on the income reform bills, Senator Bret Allain, R-Franklin, spoke about how tax rates will change.
“The new rates will be 1.85% for the lowest bracket, against 2%; 3.5 for the middle bracket, against 4, and 4.25 for the upper bracket against 6%, ”Allain told his colleagues.
And the proposed constitutional amendment would cap the personal income tax rate at 4.75%.
“A 4.75 cap is great, unless it allows them to take out more deductions, you could be back where you started,” Tullier said. “For the people who, you know, two working spouses, earning maybe between $ 60,000 and $ 100,000 a year, they won’t see a huge difference because the benefits of this federal income tax deduction will be. offset by tax rate change and that is their goal.
Moller and Tullier agree that Louisiana is an outlier, in terms of federal income tax deduction, on the state tax form.
“Absolutely, we’re an outlier in this area, and the federal income tax deduction is bad tax policy and that’s something people from all political walks of life agree with,” said Moller.
“Most states don’t have a federal income tax deduction because they start with regular income and you recognize your income just like you would on a federal return. Louisiana is one of the outliers that still relies on starting at the federal level, what they call the adjusted gross income level rather than just the traditional gross income, so Louisiana will be more in line with others. States, ”Tullier said.
Moller is also concerned that parts of the tax reform package could trigger tax cuts that would hurt education and other state spending.
“They added what we call trigger language that says if these bills are passed and passed in October and tax revenues are better than expected, it will automatically trigger tax cuts on the government. additional income and therefore this means that tax cuts would rise to the top of the list of priorities in the coming years rather than priorities like teacher compensation, early childhood education, higher education, health care, all the other things our politicians see as priorities would take a back seat to further tax cuts under this trigger language, ”he said.
Do you see a spelling or grammar mistake in our story? Click here to report it. Please include the title.
Copyright 2021 WVUE. All rights reserved.