Gov. John Bel Edwards said Thursday he is open to a flat income tax for Louisiana businesses but is wary of the same concept for individuals.
A flat income tax system is one in which all taxpayers pay the same percentage of their income regardless of how much money they make. Louisiana currently has three income tax brackets for individuals and five for corporations.
Edwards said while he would like to lower income tax rates for Louisiana taxpayers, he would prefer not to move to a single rate for everyone. Proponents of a flat tax generally argue that it's the simplest and fairest approach.
“I don’t think the poorest person in our state should pay the same thing on the first taxable dollar as the richest person pays on the last taxable dollar,” Edwards said.
Edwards, a Democrat, supports overhauling the state’s tax code by eliminating tax breaks and lowering the rates, a goal he shares with Republican legislative leaders. Eliminating the state’s tax deduction for federal income taxes paid, which would require voter approval to amend the state constitution, likely would be a critical step in that process.
Legislators in both chambers have advanced numerous competing bills in the current session that would make major changes to the state’s tax system. Lawmakers are expected to begin narrowing down their options next week.
During his weekly news conference Thursday, Edwards reiterated his position that any new tax structure should bring in about the same amount of revenue as the current one, so as not to create future budget shortfalls. He also said the federal American Rescue Plan, which is expected to send about $5.2 billion to state and local governments in Louisiana, does not allow states to use that money to plug revenue holes created by cutting taxes.
The federal government has not issued the rules governing the ARP. Edwards said he expects to find out May 10 precisely how much the state will be getting, when the allocations will be available and how the money can be spent.
Edwards and Senate President Page Cortez have said their top priority for the state’s anticipated $3.2 billion share is replenishing the state trust fund that pays for unemployment benefits, which has been emptied during the COVID-19-related downturn. Edwards said Thursday he would like to get the balance up to $750 million, which would keep employer tax rates and worker benefits at their current level, but he said it isn’t necessary to get all the way to that level during the first year ARP funds are available.
Edwards said paying off the debt the state will owe to the federal government to pay current benefits probably will cost about $200 million, plus about $400 million to shore up the fund’s balance for a total of around $600 million the first year, with the goal of being back above $750 million by the end of year two. The exact cost will depend on how much the state has to borrow and how much is collected in employer taxes.
Edwards said he is inclined to support a legislative effort to expand the state’s medical cannabis program to include smokeable marijuana. He said he is concerned about a proposal to allow people who are at least 21 years old and not barred from having a gun to carry concealed firearms without a permit, arguing the training required to get a permit “strikes the right balance” between personal rights and public safety.
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