The Louisiana Budget Project is recommending that this fall voters reject a “tax swap” tax reform proposal passed by the legislature.
The constitutional amendment would lower income tax rates in exchange for eliminating the ability to deduct federal taxes. Under the plan tax rates on income over $50,000 a year would be reduced by 1.75% while rates on income below $50,000 a year would fall half a point or less.
Executive Director of the left-leaning organization Jan Moller, pointing to the large disparity in the tax cuts being offered to upper-income residents compared to lower and middle-income residents, said this amendment really doesn’t do anything positive for most Louisianans.
“They (the Legislature) forgot about all of those folks at the middle and the bottom who aren’t going to see any benefits from this passing. The Legislature was so eager to lighten the load on businesses and to make sure that no one at the upper-income tax brackets pay an extra dollar in taxes,” said Moller pointing to one provision that, if approved, would establish a hard income tax rate cap of 4.75%.
Moller said while there are some positives, such as disentangling the state’s revenue collection from federal tax policy, the package also features some unfortunate changes. He highlighted the inclusion of an automatic trigger that would further cut taxes should the state see a surplus, a policy that opponents argue could result in deep cuts to healthcare and education should the economy tank in the future.
“The devil is always in the details when it comes to tax policy and that is the problem with this,” said Moller. “We would probably recommend that people vote no, the Legislature really missed an opportunity to do the kind of comprehensive tax reform that Louisiana needs.”
Supporters of the tax swap say it simplifies the state tax code and will make Louisiana more attractive to businesses.
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