Proposal to eliminate state income tax is shelved by Louisiana lawmakers
Rep. Richard Nelson suspended his proposal to eliminate the state income tax after discussing it this week with skeptical lawmakers at a House Ways and Means Committee meeting.
Instead, Nelson, R-Mandeville, will likely make his proposal the linchpin of his run for governor this year.
His plan includes phasing out the personal income tax and corporate franchise tax over the next four years while eliminating various tax exemptions.
It also would reduce the state’s portion of the Minimum Foundation Program formula that funds K-12 education and reduce state spending in other areas to offset any lost revenue.
Lawmakers said his proposal is unlikely to receive further attention this session.
Personal income tax generated about $4.4 billion of the state’s operating budget last year, according to a Louisiana audit report.
Other lawmakers are concerned about losing that revenue, especially with a 0.45 percent temporary sales tax increase expiring in 2025.
Rep. Jack McFarland, a Republican from Winnfield who chairs the Louisiana Conservative Caucus, has questioned how the Legislature could eliminate the income tax without a politically acceptable way to offset that revenue loss.
Nelson wants to increase state sales tax from 4.45% to 6.25% and expand the base of the sales tax to help balance the state budget. He also would like to phase out the homestead exemption, a tax exemption for all homeowners on the first $75,000 of their home’s value.
Rep. Laurie Schlegel, R-Jefferson, said she is a proponent of eliminating the income tax but not at the expense of ending the homestead exemption. Schlegel said about 70% of her constituents would oppose eliminating income tax if it means the homestead exemption is phased out.
Others say Nelson’s proposal will shift too much of the tax burden on lower-income individuals and on businesses.
Nelson acknowledged the concerns and the complexity of the proposal, saying it is “100% negotiable.”
He has argued that restructuring the tax code and eliminating the income tax is necessary to attract investment. He said he wants to strike a balance that avoids putting the burden on low-income individuals and on corporations.