Repeals the earned income tax credit. (1/1/26) (OR +$64,600,000 GF RV See Note)
The repeal of the EITC would significantly alter the landscape of Louisiana’s individual income tax structure. This credit currently amounts to 5% of the federal credit and is scheduled to decrease to 3.5% in subsequent years. Its removal may lead to an increase in tax liabilities for many low-income taxpayers, who depend on this credit for financial relief. The financial burden could lead to lesser disposable income for these families, potentially affecting local economies. Additionally, this repeal could widen the gap between high and low-income individuals, raising concerns among social service advocates about equity and assistance for vulnerable populations within the state.
Senate Bill 149, introduced by Senator Seabaugh, aims to repeal the earned income tax credit (EITC) currently available to residents of Louisiana. This tax credit provides a reduction in individual income taxes based on the taxpayer's federal EITC. The repeal is scheduled to take effect on January 1, 2026, which means that any individual taxpayer claiming this credit will no longer benefit from it after this date. Proponents of the bill argue that the repeal could contribute to simplifying the state's tax code, while critics contend that it would adversely impact low-income families who rely on this credit to alleviate their tax burden.
The sentiment around SB 149 is quite polarized. Supporters view the repeal as a necessary step towards tax reform that promotes economic efficiency. In contrast, opponents express strong disapproval, emphasizing that the repeal of the EITC will hit low-income families hardest, potentially pushing them further into financial instability. Social advocates and some lawmakers warn that this legislation signifies a step back in terms of support for working families struggling to make ends meet.
One of the notable points of contention in the discussion of SB 149 is the debate over fiscal efficiency versus social equity. Supporters of the bill argue that the current tax system needs an overhaul for better economic performance, suggesting that tax incentives like the EITC create distortions in the market. Opponents, however, argue that removing such credits disproportionately harms the weakest members of society and undermines the efforts to reduce poverty. The discussions highlight a fundamental divide on how the state should balance the need for a streamlined tax system with the obligation to support its most vulnerable residents.