Louisiana House Bill HB451

Louisiana 2019 Regular Session

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

Caption

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)

Impact

By repealing the deductibility provision, the bill is expected to raise corporate tax revenues for the state but may also lead to concerns among businesses regarding increased tax liabilities. Proponents argue that the flat rate will create predictability and fairness in corporate taxation, which could attract more businesses. Conversely, opponents of the bill warn that removing the federal deduction may disproportionately affect smaller corporations that rely on deductions to reduce their taxable income. Advocacy groups may argue that this approach undermines the principle of equitable taxation, potentially discouraging investment within the state.

Summary

House Bill 451 aims to significantly alter the corporate tax landscape in Louisiana by eliminating the deductibility of federal income taxes when calculating corporate income taxes. The bill proposes to replace the current graduated corporate income tax rates with a flat rate of 6%. This change is designed to simplify the tax structure and is positioned as a means of enhancing the business environment within the state. The proposed law is applicable for all tax years beginning on or after January 1, 2020, pending approval through a statewide election to amend the state constitution.

Sentiment

The sentiment surrounding HB 451 is mixed, with strong support from business groups who view the flat tax rate as a positive move towards simplifying tax compliance. However, critiques arise from lawmakers and businesses who fear that eliminating the federal deduction may lead to an unfavorable tax climate, particularly for small and mid-sized companies that benefit significantly from these deductions. This has sparked discussions about the balance between generating state revenue and maintaining a competitive business environment.

Contention

The main points of contention stem from concerns over the economic implications of the bill. Critics highlight the potential negative consequences on smaller corporations that lack the leverage of larger firms to absorb increased tax burdens. Furthermore, the necessity of a statewide election to amend the constitution adds a layer of complexity, as the bill's future hinges on public approval. Discussions have also focused on broader fiscal responsibilities, including the need for increased funding for public services, which may be affected by tax revenue changes.