Limits the amount of the deduction allowed for federal income taxes paid for purposes of computing the state tax on the net income of individuals (OR +$462,000,000 GF RV See Note)
Impact
The implementation of HB 704 is expected to have notable fiscal implications for the state of Louisiana, including an estimated increase in state revenue. By limiting the federal tax deduction, the state may capture additional tax income, estimated at around $462 million according to preliminary analyses. However, the change may also place a greater tax burden on individual taxpayers who previously relied on higher deductions, thus creating an adverse effect on certain constituencies.
Summary
House Bill 704, authored by Representative Katrina Jackson, proposes to amend Louisiana's individual income tax laws by capping the amount of federal income taxes that can be deducted when calculating state income tax liabilities. Specifically, the bill limits the federal deduction to a maximum of $5,000 for both resident and nonresident taxpayers. This change is significant as it directly impacts how individuals in Louisiana compute their state tax obligations, potentially increasing the amount of state taxes owed when their federal tax deductions exceed the imposed limit.
Sentiment
Sentiment around HB 704 has been mixed. Supporters argue that the cap on federal tax deductions is a reasonable measure that could benefit the state financially, enabling more funding for public services. They believe that the change promotes fairness in the tax system. Conversely, opponents of the bill contend that limiting deductions disproportionately affects lower and middle-income taxpayers who may already be struggling financially, thus exacerbating economic inequities across the state.
Contention
There are several points of contention surrounding HB 704, particularly regarding the balance between state revenue generation and taxpayer relief. Critics argue that while the state may benefit from increased revenues, the financial strain on individuals could lead to public dissent. Opponents have expressed concerns that such a change could reduce the overall incentive for taxpayers to comply with state income tax laws, leading to increased evasion or dissatisfaction with the state's tax system.
Repeals the state income tax deduction for federal income taxes paid for purposes of calculating individual and corporate income taxes (Item #17) (OR +$374,000,000 GF RV See Note)
Repeals the state income tax deduction for federal income taxes paid for purposes of calculating individual and corporate income taxes (Item #17) (RE1 SEE FISC NOTE GF RV See Note)
Repeals the state income tax deduction for federal income taxes paid for purposes of calculating corporate income taxes (Item #17) (EG +$22,000,000 GF RV See Note)
Repeals the state income tax deduction for federal income taxes paid for purposes of calculating corporate income taxes (Item #17) (EN +$22,000,000 GF RV See Note)
Levies a flat tax on corporations and eliminates the deduction for federal income taxes paid for purposes of computing corporate income taxes (OR -$58,000,000 GF RV See Note)