Louisiana House Bill HB594

Louisiana 2019 Regular Session

• Introduced: 4/17/19
• Refer: 4/22/19

Caption

Provides for reform of the state individual income tax

Impact

The potential impact of HB594 on Louisiana's tax landscape is substantial. By increasing personal exemptions and standard deductions for filers, it aims to reduce taxable income substantially. The elimination of federal itemized deductions from state calculations, including deductions for federal income taxes paid, marks a substantial shift and reflects a broader strategy to simplify the tax code while raising additional state revenue. The elimination of certain credits could further influence taxpayer behavior, particularly affecting those who previously benefited from these deductions and credits. Ultimately, the bill could shift the state's revenue dynamics and influence fiscal policy moving forward, with proponents arguing it encourages spending while opponents fear it may generate inequities in tax burdens among different income levels.

Summary

House Bill 594 proposes significant reforms to the state individual income tax system in Louisiana. The bill aims to modify the tax rates and brackets for personal income as well as for estates and trusts, thereby simplifying the overall tax structure. By maintaining a 2% tax rate on the first $12,500 of net income, the bill introduces a uniform 4% tax rate for all income above this threshold, greatly simplifying the tiers of taxation and reducing the maximum bracket that applies in the current system, which had rates up to 6%. Along with these changes, the bill plans to increase the personal exemption amounts significantly for different filing statuses, which could alleviate some tax burdens for individual taxpayers.

Sentiment

The sentiment around HB594 appears mixed among lawmakers and constituents. Proponents of the bill are likely to frame it as a necessary step toward modernizing and streamlining Louisiana's tax system, promoting fairness and potentially stimulating the economy through increased disposable income. On the other hand, critics voice concerns regarding the elimination of certain deductions and credits that help lower-income households, suggesting it could have a regressive effect on tax burdens for some groups. This divergence in perspectives reflects a broader debate on balancing state revenue needs with equitable taxation practices, with strong opinions emerging from both supporters and detractors of the bill.

Contention

Notable points of contention regarding HB594 center around the proposed elimination of the deduction for excess federal itemized personal deductions and the deduction for federal income taxes paid. Critics argue that these provisions could disproportionately affect lower-income families and those with specific financial burdens, such as significant medical expenses or dependent care costs. There is also concern that while the bill may simplify tax rates and increase exemptions, the overall approach may lead to a loss of progressive taxation principles that have historically offered greater tax relief for lower-income households. The debate hinges on the balancing act of generating state revenue while ensuring that the tax burden remains equitable across different income levels.