Reduces the amount of the individual income tax deduction for excess federal itemized personal deductions (Item #20) (OR +$25,000,000 GF RV See Note)
The bill is set to apply to all tax years starting January 1, 2018. It reflects a legislative effort to provide taxpayers with a reduction in taxable income by allowing them to deduct a higher percentage of their excess deductions. The potential fiscal impact of this bill includes an estimated increase in state budget expenditures by approximately $25 million, as it reduces the overall taxable income for state revenues. The bill's implications for state tax revenue and budgeting may attract scrutiny during discussions on its overall financial sustainability.
House Bill 21 proposes amendments to the individual income tax code of Louisiana, specifically regarding the deduction for excess federal itemized personal deductions. This bill allows taxpayers to claim a 100% deduction for such excess federal itemized deductions, which are defined as the amounts by which federal itemized deductions exceed the standard deduction for the taxpayer's filing status. However, it also excludes certain deductions from income or general sales taxes under the federal law from being counted in this calculation. This change in legislation aims to provide more clarity and simplicity to taxpayers regarding their state tax obligations.
Reactions to HB 21 appear to be mixed, primarily focused on the implications of the expanded tax deduction for individual taxpayers. Proponents are likely to view this bill positively as it directly benefits individuals by providing greater tax relief, while opponents may raise concerns regarding the fiscal impact on the state's budget. The debate is rooted in the balance between offering tax relief to citizens and maintaining sufficient state revenues for essential services and programs.
Notable contention around the bill includes the question of its long-term effects on state funding. Critics argue that decreasing tax revenue could lead to budget cuts for essential state services, potentially affecting education, infrastructure, and healthcare. The exclusion of certain deductions from being included in the calculation also raises questions about equity among taxpayers who might feel disproportionately impacted by the limitations placed on specific itemized deductions.