Louisiana House Bill HB489

Louisiana 2025 Regular Session

• Introduced: 4/4/25
• Refer: 4/4/25
• Refer: 4/14/25

Caption

Establishes rates and brackets for purpose of calculating the tax levied on individual income (OR +$197,700,000 GF RV See Note)

Impact

The implementation of HB 489 is expected to take effect on January 1, 2026, applying to taxable periods beginning on that date. By instituting these tax brackets, the bill seeks to address equity in the tax system, favoring lower-income individuals and increasing the tax burden on higher earners. This could lead to increased state revenue, which can be allocated towards public services or programs that benefit the wider community. However, the impact on individual taxpayers will vary significantly based on income levels, with middle-income taxpayers likely benefiting from the lower rate on the initial $500,000.

Summary

House Bill 489 proposes a significant change to the state income tax system in Louisiana by altering the existing flat tax rate of 3% on individual net income. Instead of a single flat rate, the bill establishes a two-bracket system that levies a 3% tax on the first $500,000 of net income and increases the rate to 4.75% on any income exceeding that threshold. This change aims to create a more progressive tax structure, potentially increasing revenues from higher-income earners while maintaining a lower rate for those with modest incomes.

Sentiment

The sentiment around HB 489 appears to be mixed. Supporters argue that moving towards a two-bracket system is a step towards a fairer taxation model that acknowledges the ability to pay more as one's income rises. They believe that this could alleviate some financial burdens on low and middle-income residents. Opponents, however, may view the increase in tax rates for higher incomes as a disincentive for business and economic growth, possibly affecting investment decisions and job creation in Louisiana.

Contention

Key points of contention surrounding HB 489 include concerns over the potential economic impact of raising tax rates for higher earners in a state already facing economic challenges. Critics may argue that this could lead to wealthy individuals relocating to states with more favorable tax environments, potentially causing long-term revenue losses. Additionally, the transition to a new tax system requires careful consideration of its implementation to ensure clarity and fairness in tax administration, which is critical in maintaining public trust in the state's fiscal policies.