Reduces the amount of the individual income tax deduction for excess federal itemized personal deductions (Item #6) (OR +$100,000,000 GF RV See Note)
Impact
The anticipated impact of HB 7 on state revenue is substantial. By reducing the allowable deduction for taxpayers, the bill is projected to increase state revenue by approximately $100 million. This fundamental shift in tax law reflects a broader strategy to streamline state taxation and potentially fund other legislative priorities. However, this change also means that individuals will see higher taxable income, leading to increased state tax liabilities for those previously benefiting fully from the deduction.
Summary
House Bill 7 aims to amend Louisiana's individual income tax laws by reducing the amount of the deduction available for excess federal itemized personal deductions from 100% to 50%. This change will apply to all tax years starting from January 1, 2018. Presently, individuals may deduct the amount by which their federal itemized deductions exceed the federal standard deduction percentage based on their filing status. This bill introduces a significant amendment, imposing a new limit on the deduction available, thereby affecting taxpayers in the state who rely on this deduction for their federal tax filings.
Sentiment
The sentiment surrounding House Bill 7 reflects a mixed response from various stakeholders. Proponents argue that the tax structure needs reform to ensure sustainable funding for state initiatives and lessen management complexities associated with federal standards. Detractors, however, express concerns about the financial burden imposed on taxpayers, particularly those who were reliant on the full deduction. They argue that this change disproportionately affects lower and middle-income individuals who utilize itemized deductions for various personal expenses.
Contention
Notably, one point of contention is the reduction of the deduction and its implications for those who plan their finances around current tax benefits. Opponents of the bill raised significant concerns about how this would increase tax burdens without adequate compensatory measures to support taxpayers affected. The debate highlighted the balance between necessary state revenue enhancements and the fiscal responsibility owed to individual taxpayers who may face increased financial strain due to this legislative change.
Compresses the middle and upper individual income tax brackets and reduces the amount of the individual income tax deduction for excess federal itemized personal deductions (Items # 1 and 6) (OR +$543,000,000 GF RV See Note)
Changes the middle and upper income tax brackets for purposes of calculating individual income tax and reduces the amount of the deduction for excess federal itemized personal deductions (Items #1 & 6) (OR +$543,000,000 GF RV See Note)