BATON ROUGE, La. (BRPROUD) – Should Louisiana do away with the income tax? That question has been swirling around lawmakers for years, but one legislator has an idea of how to make the change.
State Rep. Richard Nelson, R-Mandeville, is looking for ways for Louisiana to attract jobs and keep people from moving away. One way, he believes, is to do away with the income tax.
“I think you really have to have a real conversation with the legislators, with the public, if you want to do better, if you want Louisiana to change we have to change it,” Rep. Nelson said. “There are good and bad things that come from that.”
Louisiana’s income tax brought in $4.4 billion in FY22, while the corporate income tax brought in about $672-million. The state is ranked 16th-lowest for income tax collections in terms of state and local government revenues as a percentage of personal income. Without it, Louisiana would be the second lowest.
There has been talk in years past of doing away with the income tax, but it hasn’t come to fruition. Economists also are cautious for the coming fiscal years as how much the economy will slow down is unsure. Lawmakers also will have to find how to fill an $800-million gap in the budget in 2025, when the half cent sales tax rolls off and part of the vehicle tax is moved to a construction sub fund. The governor said he does not expect legislators to fill that gap in the 2023 session, but Nelson is hopeful his plan could set the state on a new path.
“What’s the second part of that? How are you going to replace the revenue?” said Gov. John Bel Edwards at his end-of-year news conference when asked about getting rid of the state income tax.
Nelson’s idea would broaden property taxes, alter the homestead exemption, revisit tax credits and exemptions, and make changes in the state sales taxes. Louisiana has the 46th-lowest property taxes in the country, which Nelson said is what sets Louisiana apart from the states in the region.
“My concept is really you’re going to package those changes with eliminating income tax and some of these other non-competitive taxes,” Nelson said. “When you put that together it’s something where people will win. It’s not ‘hey trust me when we get rid of these tax breaks that I am going to be looking for you after that.’”
Nelson has been leading a study group at the capitol for months to learn about the state’s tax structure. He said most lawmakers are open to changes, but the difficulty is settling how to fill the financial gaps. He plans to file legislation on this issue in the new year.
Nelson said he still plans to run for governor in 2023 and will have more information about his campaign in January.