By T. Scott Boatright
BATON ROUGE — A potential constitutional amendment and could lower the maximum allowable personal income tax rates and remove a major tax break from the state Constitution was approved by the state Senate on Tuesday.
According to current wording in the state constitution, lawmakers can’t raise income tax rates above what was in effect in 2003, which is 2% on the first $12,500 of net income, 4% on the next $37,500 and 6% on income above $50,000. Top rates for corporations would be reduced from 8% to 6%.
The proposed Senate Bill 169 amendment would eliminate references to those rates and establish a maximum rate of 5%.
“Simplicity and predictability is what we’re after,” Sen. Bret Allain, R-Franklin, chair of the Senate Tax Policy Committee,” told The Center Square of Louisiana.
Senate Bill 159 was passed by a 36-3 vote, considerably more than the two-thirds threshold a proposed constitutional amendment needs to advance, and now moves on to the House.
House Bill 278, companion legislation developed by Rep. Stuart Bishop, R-Lafayette, chair of the House Ways and Means committee, proposes those rates be set at 1.85%, 3.51% and 4.25%. the rates would be set at 1.85%, 3.51% and 4.25%.
Should the proposed legislation be passed, it would still need to be approved by state voters in either October 2021 or October 2022 because it would amend the state Constitution and to do so would require an election.
On the floor of the Senate on Tuesday, Allain said that most people would pay about the same amount of tax, and the state would collect about the same amount of revenue if the legislation is passed.
Allain’s Senate Bill 161, which proposes to extend a suspension of the corporate franchise tax on the first $300,000 of taxable capital with $1 million or less of taxable capital until 2026, also passed through the Senate on Tuesday.
That suspension, put into place to help small companies struggling in the midst of the COVID-19 pandemic, is currently set to expire at the end of the ongoing fiscal year that will end on June 30. According to the Legislative Fiscal Office, the change would reduce state tax collections by about $7.5 million per year.