Louisiana House Bill HB788

Louisiana 2015 Regular Session

• Introduced: 4/21/15
• Refer: 4/22/15

Caption

Reduces the rates for the tax levied on individual income tax in favor of a flat tax and eliminates all individual income tax credits, deductions, exclusions, and exemptions

Impact

The passage of HB 788 would profoundly affect the state's income tax system. The elimination of various tax credits and deductions could lead to increased tax liabilities for certain taxpayers, particularly those who previously benefited from such provisions. In contrast, the simplified flat tax structure may benefit lower-income earners by removing complexity and providing a more predictable tax obligation. However, the financial implications for those in the middle and upper-income brackets could vary significantly, as they would lose previous tax benefits but also face a more straightforward tax rate.

Summary

House Bill 788 proposes significant changes to the individual income tax structure in Louisiana by replacing the current graduated tax rates with a flat tax system. The legislation intends to simplify the tax code by eliminating all individual income tax credits, deductions, exclusions, and exemptions. Specifically, it reduces the individual income tax rate to 0% on the first $12,000 of income, with a 2.5% flat rate on income above that threshold, effectively streamlining compliance for taxpayers.

Sentiment

The sentiment around HB 788 appears to be mixed among legislators and constituents. Proponents argue that a flat tax system simplifies taxation, making it more efficient and transparent, which could foster a more favorable business environment. Conversely, critics express concern over the loss of tax credits that provide essential financial relief for low-income families, the elderly, and others who rely on such deductions for their economic stability.

Contention

A notable point of contention lies in the impact of abolishing individual income tax credits and deductions. Detractors fear that this move could disproportionately burden lower and middle-class families who would benefit less from the flat tax compared to the existing graduated structure. Additionally, the transition to a flat tax may face resistance from various advocacy groups, particularly those focused on tax equity and social welfare, as removing credits could reduce the effectiveness of policies intended to alleviate poverty and support vulnerable populations.