Despite facing a $194 million budget shortfall, the push to reduce—and perhaps eventually eliminate—Louisiana’s personal income tax remains very much alive.
That’s according to state Rep. Julie Emerson, R-Carencro, who told the Press Club of Baton Rouge on Monday afternoon that voters’ rejection of Constitutional Amendment No. 2 last month has not derailed broader efforts to make Louisiana more competitive with states like Texas, Florida and Tennessee. Reducing the personal income tax, she said, is central to that vision.
“A lot of states around us are moving in that direction. … We want to catch up with that,” said Emerson, who authored Constitutional Amendment No. 2 and chairs the House Ways and Means Committee. “It’s certainly been shown that as you drop rates on the corporate income tax and personal income tax side, it does help stimulate your economy.”
One of the components of Constitutional Amendment No. 2 that would have made it easier to drop rates, according to Emerson, was merging two state trust funds: the Budget Stabilization Fund, also known as the rainy day fund, and the Revenue Stabilization Trust Fund. The maneuver would have put a little over $1 billion in recurring revenue back into the general fund, helping offset the revenue lost from dropping rates.
Like many components of the failed amendment, the trust fund merger is poised to be reintroduced as a standalone measure in the upcoming regular legislative session starting next Monday.
“It’s important to put that recurring revenue back into the general fund because just that alone could help us incredibly reduce income tax rates,” Emerson said.
Constitutional Amendment No. 2 was a sweeping reform of the largest section of the Louisiana Constitution, Article VII, which governs revenue and taxation. The amendment failed with 64.7% of voters in opposition and 35.3% of voters in support.
Lawmakers approved a flat 3% personal income tax rate in a special session on tax reform last fall, replacing a tiered system that topped out at 4.25%. Constitutional Amendment No. 2 would have lowered the maximum legal rate from 4.75% to 3.75%.
