(The Center Square) — Officials with the Louisiana Department of Revenue and Legislative Fiscal Office broke down the state’s income tax structure for lawmakers on Wednesday in the latest meeting focused on revamping the tax system.
Lawmakers on the Louisiana House Ways and Means’ State Tax Structure Subcommittee held a four-hour meeting Wednesday to hear from revenue officials on the state’s various income tax collections and exemptions.
The meeting was the latest in a series leading up to the 2023 legislative session, when lawmakers are expected to explore options to further reduce or eliminate the income tax. Gov. John Bel Edwards signed off on lowering the tax rate through a constitutional amendment approved by legislators and voters in 2021, earning him praise from policy groups like the Cato Institute.
Luke Morris, assistant secretary for the Department of Revenue, presented details to lawmakers on Wednesday for each of Louisiana’s three major income tax sources: Individual, corporate, and corporate franchise taxes.
Louisiana is home to an estimated 4.6 million people, including 4.1 million taxpayers and 1.2 million dependents. Current tax brackets for individuals are 1.85% for those making up to $12,500, 3.5% for those earning between $12,500 and $50,000, and 4.25% for Louisiana residents who make over $50,000 a year, with the thresholds doubled for those married filing jointly and surviving spouses.
In 2021, the state received a total of about 2.1 million tax returns from residents resulting in more than $4 billion in income tax, or about $3.8 billion after various available credits. Of those returns, the largest percent of income tax after credits came from 67,139 residents earning between $200,000 and $500,000, which accounted for about 19%, or nearly $728 million. The 166,206 Louisiana residents in the $100,000 to $150,000 income bracket contributed the second largest percentage at 17%, or about $658 million. Roughly 11% of income tax after credits came from those in the $150,000 to $200,000 income bracket, who generated about $426 million, while the 4,867 filers in the $1 million plus bracket contributed 10%, or about $362 million.
Those filing personal income taxes received $153 million in nonrefundable credits, and nearly $121 million in refundable credits, while exemptions totaled $2.1 billion in fiscal year 2021, Morris said.
Louisiana’s corporate income tax starts at 3.5% for those earning up to $50,000, 5.5% for incomes between $50,000 and $150,000, and 7.5% for businesses taking in over $150,000. The state’s roughly 60,000 C corporations and 71,000 pass-through businesses claimed about $1.4 billion in exemptions.
A total of 23,407 businesses filed returns with available net operating losses of $85 billion, producing a net income of negative $4 billion. Of the 140,952 corporate income tax returns received during fiscal year 2021, 21,991 or 15.6% filed in the less than $0 income bracket with a total taxable income of negative $59 billion. Another 91,081 returns or 64.62% were filed in the $0 income bracket with no taxable income.
The largest share of total liability came from 156 businesses in the $10 million plus bracket, which accounted for $5 billion in taxable income and $402 million in income tax liability, or about half of the total. All told, Louisiana’s 140,952 corporate income tax returns filed in 2021 resulted in a taxable income of negative $49 billion, and an income tax liability of $811 million, Morris said.
More than 139,000 Louisiana businesses filed corporate franchise tax returns in fiscal year 2021 with a total taxable base of $161 billion and a franchise tax liability of $494 million. Those returns claimed a total of $79.7 million in refundable credits and $80.7 million in nonrefundable credits.
Overall, 40% of the state’s fiscal year 2021 revenue collections came from individual income tax, 6% came from corporate income tax, and 2% from the corporation franchise tax.
The year prior, individual income tax accounted for 34.4% of collections, corporate income tax was 4%, sales tax was 31.4%, and other taxes accounted for 29.5%, Revenue officials said.
Debbie Vivian, chief economist with the Legislative Fiscal Office, also presented an overview of how those figures work into the state’s revenue estimates and how it’s distributed.
Several lawmakers probed officials on various exemptions and how they apply, as well as efforts required to collect income taxes versus others. They expect to hold more hearings on other aspects of the state’s tax structure in the weeks to come, with a focus on sales tax at the next meeting in two weeks.