Reduces the amount of the individual income tax deduction for excess federal itemized personal deductions (Item #42) (OR +$116,700,000 GF RV See Note)
The bill potentially results in an increase in revenue for the state as a consequence of reducing the deductions claimed by individuals. By lowering the deduction threshold, HB11 aims to align state income tax contributions more closely with federal regulations while also addressing state financial needs. As a result, this change could enhance the state's ability to fund public services by broadening the tax base and increasing net tax collections, albeit at the cost of reducing individual tax relief.
House Bill 11 aims to amend the individual income tax structure by significantly reducing the amount of the deductible excess federal itemized personal deductions. Specifically, the bill proposes to lower the allowable deduction from 100% to 57.5% for all tax years beginning after January 1, 2016. This reduction affects individual taxpayers who normally rely on itemized deductions to lower their taxable income, thereby impacting their overall tax liabilities and financial obligations to the state.
Discussing HB11 has evoked mixed sentiments among both legislators and the public. Supporters argue that the reform is necessary for state revenue stability, ensuring that the financial needs of the state government are adequately met. Conversely, opponents express concerns about the increased tax burden on individuals, particularly on those who benefit most from itemized deductions due to high medical expenses or housing costs. This divergence in perspectives reflects ongoing tensions regarding taxation and public funding priorities.
A point of contention surrounding HB11 is its potential effects on households that heavily utilize itemized deductions. Critics argue that reducing this deduction could disproportionately impact middle and low-income individuals who rely on these deductions for essential expenses. Additionally, there are apprehensions about whether this move could lead to broader economic implications, such as reduced consumer spending, as individuals have less disposable income due to increased taxes.