Louisiana House Bill HB233

Louisiana 2021 Regular Session

• Introduced: 3/25/21
• Refer: 3/25/21
• Refer: 4/12/21

Caption

Provides for a flat rate for purposes of calculating individual income tax and modifies income tax credits, deductions, and exemptions

Impact

By establishing a flat income tax rate of 3% and modifying the deductions and credits available, HB 233 could result in a more predictable tax liability for individual taxpayers in Louisiana. The increase in personal exemptions—up to $20,000 for married joint filers—along with the enhancement of the earned income tax credit to 10% of the federal credit, is expected to provide financial relief to low- and middle-income households. This could potentially stimulate economic activity by increasing disposable income, thereby supporting state revenue in the long run.

Summary

House Bill 233 proposes significant modifications to the Louisiana individual income tax structure. Primarily, the bill moves from a graduated tax system to a single flat rate of 3% for individual income tax liability. This reform aims to simplify tax liabilities and provide clarity to taxpayers. Additionally, the bill includes provisions to eliminate certain deductions, such as excess federal itemized personal deductions and federal income taxes paid, while increasing the amount allocated for the earned income tax credit. These changes are designed to create a more straightforward tax system, promoting compliance and reducing administrative burdens.

Sentiment

The sentiment surrounding HB 233 appears to be mixed. Proponents of the bill, particularly from the Republican side of the legislature, argue that the transition to a flat income tax rate will simplify the complex graduated system, enabling easier tax compliance and transparency. However, critics, perhaps from the Democratic party or advocacy groups, express concerns that removing various deductions may disproportionately affect lower-income residents who benefit from them, thus raising equity concerns regarding the impact on lower-income families and individuals.

Contention

Notably, the most contentious aspects of HB 233 revolve around the repeal of certain deductions which have traditionally provided taxpayers with avenues to lower their tax liabilities. Opponents argue that these changes could exacerbate financial burdens for individuals who rely on these deductions, particularly those with higher medical expenses or significant state and local tax burdens. The balance between simplifying the tax code and maintaining equitable tax policies remains a key discussion point among legislators as they consider the implications of this bill.