LEGISLATIVE FISCAL OFFICE
Fiscal Note
Fiscal Note On: HB 278 HLS 21RS 794
Bill Text Version: ENROLLED
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: June 15, 2021 10:43 AM Author: BISHOP, S.
Dept./Agy.: Revenue
Subject: Individual Income Tax Analyst: Greg Albrecht
TAX/INCOME TAX EN -$600,000 GF RV See Note Page 1 of 2
Reduces the tax rates for purpose of calculating individual income tax liability and eliminates and modifies certain income tax
deductions
Proposed law modifies the individual income tax to reduce the existing rates to 1.85%, 3.50%, and 4.25% (from the current rates of 2%,
4%, and 6%). Existing brackets are retained. The bill also eliminates the deduction for federal income taxes paid, and limits the deduction
for excess federal itemized deductions to only the amount attributable to medical expenses.
Proposed law provides further tax rate reductions through a procedure that reduces the rates by the percent that income tax collections
exceed those of FY19 that have been adjusted annually by the expenditure limit growth rate. Rate reductions occur if (a) both individual
income tax and total REC-based tax receipts exceed their respective FY19 growth-adjusted receipts and, (b) the Budget Stabilization Fund
balance is at least 2.5% of total state revenue receipts. Withholding tables are to be adjusted appropriately. This process begins April
2024, potentially first affecting FY25 collections, and repeats annually through 2034.
The bill is effective for tax periods beginning on and after January 1, 2022. Contingent upon adoption of constitutional amendments
contained in HB274 or SB159, as well as enactment of statutory companions HB292 and SB161 of this session.
EXPENDITURES 2021-22 2022-23 2023-24 2024-25 2025-26 5 -YEAR TOTAL
State Gen. Fd. $0 $0 $0 $0 $0 $0
Agy. Self-Gen. $0 $0 $0 $0 $0 $0
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total $0 $0 $0 $0 $0 $0
REVENUES 2021-22 2022-23 2023-24 2024-25 2025-26 5 -YEAR TOTAL
State Gen. Fd. $1,500,000 $1,000,000 ($600,000) ($600,000) ($600,000) $700,000
Agy. Self-Gen. $0 $0 $0 $0 $0 $0
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total $1,500,000 $1,000,000 ($600,000) ($600,000) ($600,000) $700,000
EXPENDITURE EXPLANATION
Implementation of this proposal will result in approximately $51,000 of programming, testing and system development costs
related to the revision of the affected tax administration system. Additional estimated expenses of $36,000 are associated
with LDR’s Revenue Processing Center (RPC) updating equipment and software to process the revised return in FY 2022. LDR
will also promulgate new rules to issue revised withholding tables and tax tables as required by R.S. 47:295. Additional costs
will be incurred in later years if further tax rate reductions are triggered.
REVENUE EXPLANATION
The bill is estimated to result in an aggregate annual tax table liability increase of $6.9 million. In general, filers that itemize
on their federal returns will face a tax increase, while filers who do not itemize will face a tax decrease. This estimate is
generated by a micro-simulation model processing 2019 resident and nonresident individual income tax data, with fiduciary
receipts added as their share of FY20 total individual income tax receipts (0.498%). The return data reflect the significant
federal income tax changes that first affected state taxes for tax year 2018. The medical expense excess itemized deduction
effect is estimated from 2018 IRS data for Louisiana resident federal filings, resulting in $7.5 million of state tax losses from
the case of no excess itemized deductions allowed, and exogenously added to the aggregate liability change discussed
above, to result in the fiscal year effects displayed in the table above. The tax year liability change estimate is translated to
fiscal year receipt estimates in the revenue table above, inclusive of the medical expense excess itemized deduction. That
translation process is discussed on page 2.
The bill also provides further tax rate reductions through a procedure (starting in February 2024 and repeated each
year through 2034) that reduces the rates by the percent that actual income tax receipts in the prior completed fiscal year
have exceeded FY19 growth-adjusted receipts. Rate reductions occur if (a) both individual income tax receipts and total
REC-based tax receipts in the prior completed fiscal year exceed FY19 growth-adjusted revenues and, (b) the Budget
Stabilization Fund balance is at least 2.5% of total state revenue receipts of the prior fiscal year. Growth adjustment is
based on the expenditure limit growth factor, and assures that estimated revenue base growth accrues to the state fisc,
while revenue growth in excess of that is channeled into income tax reductions. If rate reductions are triggered, withholding
tables will be adjusted appropriately for the ensuing tax year which begins January 1 of each year after the February
calculations.
The individual income tax base-broadening and rate-reduction in this bill are contingent upon constitutional amendments (HB 274 or
SB 159) and statutory companions that also broaden the corporate income tax base, and reduce the corporate income tax (HB 292) and
franchise tax rates (SB 161). The individual income tax provisions of this bill are essentially revenue neutral from an aggregate state fiscal
perspective. The combined corporate tax impact of (HB 292, corporate income tax) and (SB 161, franchise tax) is also closely revenue
neutral in FY22 -$2.2M and FY23 +$1.1M, and then becomes a net revenue decrease in each subsequent year; FY24 -$21.1M, FY25 -
$26.7M, FY26 and beyond -$26.7M. Over the five-year fiscal note horizon, the two bills result in a $75.6M revenue decrease. (see the
fiscal notes on those bills & page 2).
Senate Dual Referral Rules House
13.5.1 >= $100,000 Annual Fiscal Cost {S & H} 6.8(F)(1) >= $100,000 SGF Fiscal Cost {H & S}
Christopher A. Keaton
x 13.5.2 >= $500,000 Annual Tax or Fee 6.8(G) >= $500,000 Tax or Fee Increase
Change {S & H} Legislative Fiscal Officer
or a Net Fee Decrease {S}
LEGISLATIVE FISCAL OFFICE
Fiscal Note
Fiscal Note On: HB 278 HLS 21RS 794
Bill Text Version: ENROLLED
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: June 15, 2021 10:43 AM Author: BISHOP, S.
Dept./Agy.: Revenue
Subject: Individual Income Tax Analyst: Greg Albrecht
CONTINUED EXPLANATION from page one: Page 2 of 2
Continued Revenue Explanation From Page 1
The tax year liability change estimate is translated to fiscal year receipt estimates in the revenue table above, inclusive of
the medical expense excess itemized deduction, in consultation with the Dept. of Revenue regarding the share of liability
change typically collected through withholdings (79%), declarations (8%), and return filings (13%). The first fiscal year of
effect will be FY22 with tax receipts affected through withholdings changes; with this estimate assuming a one-quarter lag
for discernible impact. No lag is assumed for declarations since they are first due in April of the year. Receipts for the second
fiscal year, FY23, will step down due to four quarters of withholdings and declarations, plus the catch-up of the first tax
year’s first quarter liability change when returns are filed, plus the amount of liability change typically realized on returns
rather than through withholdings or declarations and, inclusive of the first annual effect of the medical excess itemized
deduction being realized. The bill’s tax year changes fully transition to fiscal year realizations by the third fiscal year, FY24,
with tax year liability changes (and medical excess itemized deduction effects) equal to fiscal year collections changes.
No growth path has been assumed for purposes of the fiscal note. The state personal income tax has experienced significant
shocks in recent periods as a result of federal tax law changes, as well as the coronavirus pandemic event. Additional shocks
are likely, associated with the federal pandemic support actions. In addition, federal tax law changes which began affecting
state tax receipts in 2018, are currently scheduled to expire at the end of 2025.
Senate Dual Referral Rules House
13.5.1 >= $100,000 Annual Fiscal Cost {S & H} 6.8(F)(1) >= $100,000 SGF Fiscal Cost {H & S}
Christopher A. Keaton
x 13.5.2 >= $500,000 Annual Tax or Fee 6.8(G) >= $500,000 Tax or Fee Increase
Change {S & H} Legislative Fiscal Officer
or a Net Fee Decrease {S}

Statutes affected:
HB278 Original: 47:32(A), 47:293(3), 47:295(B), 47:1(B)(3), 47:293(4)
HB278 Engrossed: 47:32(A), 47:293(3), 47:295(B), 47:1(B)(3), 47:293(4)
HB278 Reengrossed: 47:32(A), 47:293(3), 47:295(B), 47:1(B)(3), 47:6(A), 47:7(A), 47:293(4)
HB278 Enrolled: 47:32(A), 47:293(3), 47:295(B), 47:6(A), 47:7(A), 47:293(4), 47:1(B)(3)
HB278 Act 395: 47:32(A), 47:293(3), 47:295(B), 47:6(A), 47:7(A), 47:293(4), 47:1(B)(3)