State constitution raises Louisiana taxes

Ashish Dev, [email protected]

The Louisiana Department of Revenue recently adjusted the sum of money to be withheld from employees’ paychecks. Following this adjustment, employers will have to bring the new withholding tables into effect.
Louisiana taxpayers can expect to see more money come out of their paychecks this year.
According to state fiscal estimates, Louisiana residents are expected to pay about $226 million more in state income taxes than last year.
The extra money gained by the state’s tax increase will be used to help deal with its $1 billion budget shortfall. The added money can help avoid cuts to higher education, like the ones seen in previous years.
The increase in the state tax rates is due to the linkage between state tax and federal tax laws in the Louisiana’s constitution. This means that any change in the federal tax rates has a direct effect on the state tax rates, without the decision from the Louisiana legislature.
However, the effect of this change in tax rates on corporations in Louisiana is unclear.
“It doesn’t seem like it’s going to create a burden for many people in Louisiana, but the total amount of money collected from the income tax by the state isn’t going to be its solution for the budget shortfall either,” said assistant professor of the School of Behavior and Social Science, Jessica Anderson.
There are two changes that have gone into effect and will affect taxpayers.
Firstly, there will be a decrease in the amount that can be deducted from the state income tax. In Louisiana, an individual or business can deduct the amount they pay in their federal income taxes from their state income taxes.
Secondly, the standard deduction people can take from their federal income taxes has increased substantially.
This means that fewer people will need to itemize their federal income tax deductions than before.
Itemizing is a tax perk typically used by people with higher incomes who are more likely to have large federal income tax bills.
In Louisiana, if you itemize deductions in your federal income taxes, you are allowed to take some of those deductions at the federal level.
According to the legislature’s chief economist, Greg Albrecht, fewer people will qualify for those dedections at the state level now that fewer people will itemize deductions at the federal level.
This will have a big effect on taxpayers wealthy enough to itemize deductions for home mortgages, property taxes and charitable donations.
As shown by the IRS data, about 460,000 Louisiana residents, or roughly 25 percent of the state’s taxpayers, itemized deductions in 2015.
Associate professor of the School of Behavioral and Social Science, Joshua Stockley, said, “I am skeptical that this tax reform package will create an economic benefit for the United States. Historically speaking, tax cuts have a very mixed legacy in actually creating economic expansion and may undoubtedly lead to large deficits.”
The increased state taxes will range from just tens of dollars to a few hundred more for each taxpayer, based on their level of income.
According to state officials, the increases would equal just a fraction of the federal tax cuts, because the state’s top tax rate is only six percent.