Louisiana House Bill HB416

Louisiana 2019 Regular Session

• Introduced: 3/29/19
• Refer: 3/29/19
• Refer: 4/8/19
• Report Pass: 4/29/19

Caption

Provides for a flat tax rate for purposes of calculating individual income tax and modifies other income tax credits and deductions (EG +$38,000,000 GF RV See Note)

Impact

The proposed law's transition to a flat rate income tax is expected to have broad implications for taxpayers in Louisiana. For many filers, especially those who previously benefited from lower rates on smaller incomes, it may lead to higher overall tax liabilities. Conversely, higher-income individuals could benefit from the flat rate, as their tax rates will decrease compared to the previous structure. The elimination of federal income tax deductions from state calculations is also noteworthy, impacting how residents compute their taxable income. The bill is applicable to taxable periods starting January 1, 2020, pending approval of a related constitutional amendment.

Summary

House Bill 416 proposes a significant overhaul of the individual income tax structure in Louisiana by introducing a flat tax rate of 4.15%. This bill eliminates the existing graduated income tax system, which taxed income at varying rates based on income brackets. The change is intended to simplify the tax calculation process for individuals and enhance overall tax efficiency. Additionally, the bill modifies income tax credits and deductions, raising personal exemptions for individual and joint filers, and aims to streamline the process for tax calculations across the board.

Sentiment

The sentiment surrounding HB 416 is polarized. Supporters argue that moving to a flat tax will simplify the tax filing process, reduce confusion, and could attract businesses to the state due to perceived tax fairness. Detractors express concern that the flat tax disproportionately impacts lower and middle-income residents and undermines the progressivity of the tax system. As a result, the debate highlights significant concerns regarding equity in tax policy and the balance between revenue generation and taxpayer burden.

Contention

Key points of contention in the discussions around HB 416 included the implications of removing federal tax deductions, which many critics argue could disproportionately disadvantage lower-income residents who rely on such deductions. Additionally, there are fears regarding the potential impact on state revenue, as many legislators argue the flat rate might not generate adequate funding for state services. The bill’s success hinges not only on legislative approval but also on how well it is received by the public and whether the proposed constitutional amendment garners sufficient support.