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House tax committee voted to advance Landry's proposed flat 3 percent personal income tax rate

1 month 2 days 12 hours ago Friday, November 08 2024 Nov 8, 2024 November 08, 2024 11:51 AM November 08, 2024 in News
Source: LSU Manship School News Service

BATON ROUGE — A House tax committee voted Thursday to advance Gov. Jeff Landry’s proposal for a flat 3% personal income tax rate.

If approved by the full House and Senate, the plan would eliminate the current income tax brackets and move the state closer to Landry’s ultimate goal of eliminating the income tax.

Thursday’s vote by the House Ways and Means Committee marked the first step in passing what is seen as Landry’s flagship portion of the tax plan introduced during his Wednesday speech at a special session of the Legislature.

“This is an income tax cut for everyone in Louisiana,” said Rep. Julie Emerson, R-Carencro, who chairs the committee. “The overall goal is to stimulate the economy and broaden our tax base. We want to show the people we are lowering their personal income tax rates, just like other states where they are thriving.”

The committee passed the bill 15-3 vote, with Democratic Reps. Marcus Bryant of District 96, Mandie Landry of District 91 and Matthew Willard of District 97 in opposition.

“I voted against the flat tax because it is a regressive tax,” Rep. Landry said. “It rewards the rich and harms the poor.”

The committee also voted Thursday on another portion of Landry’s tax plan: eliminating the corporate franchise tax. The measure would remove the tax levied by the state on major corporations wanting to do business in Louisiana.

It passed 17-1, with Willard as the only dissenting member.

These two bills will be considered by other House committees before they reach the House floor.

Jan Moller, the executive director of Invest in Louisiana, was disappointed by the committee’s decisions.

“An almost $2 billion tax cut was passed today,” he said, referring to the costs of both bills combined. 

He said the benefits of the tax cuts will flow disproportionately to the wealthy and people living out of state. His fear is that the money given in the form of tax cuts to corporations will go shareholders elsewhere instead of staying in Louisiana to benefit education and healthcare.

“When you cut taxes to this magnitude,” Moller said, “you run the risk of having to make deep cuts to services citizens depend upon.”

The tax changes would cost the state $7.4 billion over the next five years. Landry aims to offset these reductions by broadening the sales tax base to tax more services such streaming services and luxury services such as lawn care as well as reducing special-interest tax breaks.

He says these changes will encourage businesses and families to stay in the state.

“If we do not act, studies show that one in four children will leave our state for better opportunities,” Landry told lawmakers Wednesday. “The time for piecemealing, stalling and kicking the can down the road is over.”

During his speech, Landry introduced the other portions of his tax plan, which include eliminating the sales tax on prescription drugs and more than doubling the income tax deduction for seniors.

He also proposed a permanent pay raise for all teachers by tapping into a frozen $2 billion education fund.

The governor framed these reductions as essential investments in Louisiana’s future, suggesting that this relief for seniors and teachers would allow the state to retain talent and improve quality of life.

“Cutting our personal income tax by 30% will trumpet a new day in Louisiana,” he said. “We will effectively eliminate the income tax for the working poor, putting us on a path for eliminating the income tax once and for all,” Landry said.

Landry says that if the Legislature does not accept his tax plan in full, then residents will be “stranded halfway across the river.” He says that every aspect of his plan must coincide with other parts of the proposal to achieve the kind of change that Louisianians need.

The state is heading for a fiscal cliff next year, thanks to the expiration of .45% of the state sales tax and a 2% business utilities tax in June 2025.

Moller believes that the easiest way to fix the fiscal cliff is to renew those taxes or replace them.

He is frustrated that the Legislature has called a special session right now to address the impending fiscal cliff. He said lawmakers are working on a tighter deadline than is necessary.

“A fiscal cliff is not a natural disaster,” Moller said. “The legislature created it. They can fix it.”

State legislators are privately expressing concern that they will not have enough time or information to make the changes that Landry wants without causing more problems than they solve.

Landry and Revenue Secretary Richard Nelson have been holding private meetings with various lawmakers and making public presentations to try to sell the plan. 

Anna Puleo and Avery Sams contributed additional reporting.

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