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Stelly Plan
Act 88 (HB 31) and Act 51 (HB 36) by Representative Stelly
reduce the personal income tax brackets and eliminate the excess
itemized deduction and the current state sales tax on food and
residential utilities. Effective January 1, 2003, the state sales
and use tax on such items shall not exceed 2 percent, and after
June 30, 2003, there shall be no state sales and use tax on such
items.
In summary, as estimated by the Legislative Fiscal Office, the
net percentage tax change:
- is an attempt to represent the maximum combined effect of
changes in both income and sales taxes relative to current tax
liability;
- creates a net tax liability reduction on the average return
earning less than $60,000 annually;
- provides for a net increase in tax liability on the average
return of 1% in the $60,000 - $80,000 federal adjusted gross
income bracket - the net dollar tax increase on the average
return is estimated to be $9;
- provides for a net increase in tax liability on the average
return of11% in the $80,000 - $100,000 federal adjusted gross
income bracket - the net dollar tax increase on the average
return is estimated to be $219;
- provides for a net increase in tax liability on the average
return of 21% in the $100,000 - $120,000 federal adjusted
gross income bracket - the net dollar tax increase on the
average return is estimated to be $478;
- provides for a net increase in tax liability on the average
return of 28% in the $120,000 - $140,000 federal adjusted
gross income bracket - the net dollar tax increase on the
average return is estimated to be $725;
- provides for a net increase in tax liability on the average
return of 26% in the $140,000 - $160,000 federal adjusted
gross income bracket - the net dollar tax increase on the
average return is estimated to be $830;
- provides for a net increase in tax liability on the average
return of 23% in the $160,000 - $180,000 federal adjusted
gross income bracket - the net dollar tax increase on the
average return is estimated to be $905;
- provides for a net increase in tax liability on the average
return of 22% in the $180,000 - $200,000 federal adjusted
gross income bracket - the net dollar tax increase on the
average return is estimated to be $995; and,
- provides for a net increase in tax liability on the average
return of 12% in the over $200,000 federal adjusted gross
income bracket - the net dollar tax increase on the average
return is estimated to be $1811.
The net tax liability for the average return in each income
category would increase progressively above $60,000. The net
percentage change the average taxpayer incurs begins to decline
beyond $160,000. This is due to a fixed maximum effect resulting
from bracket compression and the fact that excess federal itemized
deductions grow more slowly than income grows beyond the income
level of $160,000 per year. In addition, sales taxes paid do not
grow in proportion to growth in income.
In Louisiana, approximately 20% of the residents itemized
deductions in tax year 2000.
- State General Fund Impact of Stelly Plan Implementation
- As outlined in the Legislative Fiscal note for the Stelly
plan (see Appendix B) the net impact is as follows:
Fiscal
Year
|
Sales
Tax Loss
|
Income
Tax Gain
|
Net
Impact
|
2002-2003
|
$64
million
|
$55
million
|
($
9 million)
|
2003-2004
|
$240
million
|
$244
million
|
+$4
million
|
2004-2005
|
$245
million
|
$263
million
|
+$18
million
|
2005-2006
|
$249
million
|
$282
million
|
+$33
million
|
2006-2007
|
$254
million
|
$304
million
|
+$50
million
|
The
net revenue gain tends to increase over time because of the growth
associated with the income tax (projected 7.5% per year trend
growth). This growth
rate out-paces the growth rate of the sales tax on food and
utilities (projected 1.8% per year trend growth) which explains
why, after the first year, the State General Fund does not
experience a loss – rather the net impact is positive.
The Stelly Plan generates revenue above and beyond current
income taxes levels because the plan calls for the compression of
income brackets and elimination of allowing the deduction of
federal excess itemized deductions.
General Income Tax
Information
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States that do not tax personal income:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
States that allow for the deduction of federal income taxes:
- Louisiana
- Alabama
- Iowa
- Montana
States that allow for the deduction of federal income taxes
with some adjustments:
- Missouri
Deduction is limited to $10,000 for joint returns and $5,000
for individuals
- Oklahoma
The rate range reported is for single persons not deducting
federal income tax. For married persons filing jointly, the
same rates apply to income brackets ranging from $2,000 to
421,000. Separate schedules, with rates ranging from 0.5% to
10% apply to taxpayers deducting federal income taxes.
- Oregon
Deduction is limited to $5,000
- Utah
One half of the federal income taxes are deductible.
Federal Excess Itemized
Deduction Allowances By State
States Allowing
Federal Itemized Tax Deductions
|
States Not
Allowing Federal Itemized Deductions
|
States Adjusting
Federal Itemized Deductions
|
States Only
Adjusting Federal Itemized Deductions for State Income
Taxes
|
New
Mexico
|
Connecticut
|
Alabama
|
Colorado
|
Oklahoma
|
Illinois
|
Arizona
|
Idaho
|
Rhode
Island
|
Indiana
|
Arkansas
|
Kansas
|
Vermont
|
|
California
|
Maryland
|
|
Michigan
|
Delaware
|
Mississippi
|
|
New
Jersey
|
District
of Columbia
|
Nebraska
|
|
Ohio
|
Georgia
|
North
Carolina
|
|
Pennsylvania
|
Hawaii
|
Utah
|
|
West
Virginia
|
Iowa
|
|
|
Wisconsin
**
|
Kentucky
|
|
|
|
Louisiana
|
|
|
|
Maine
|
|
|
|
Minnesota
|
|
|
|
Missouri
|
|
|
|
Montana
|
|
|
|
New
York
|
|
|
|
North
Dakota
|
|
|
|
Oregon
|
|
|
|
South
Carolina
|
|
|
|
Virginia
|
|
* Massachusetts has state itemized deductions.
** Wisconsin provides for a credit allowed based on specific
federal itemized deductions.
Source: Louisiana Department of Revenue
STATE ADJUSTMENTS
- Alabama
Adjustments for medical expenses, state & foreign income
taxes & other items.
- Arizona
Adjustments for medical expenses.
- Arkansas
Adjustments for medical expenses, state taxes, &
charitable gifts.
- California
Adjustments for state & foreign income taxes, federal
estate taxes, interest, & other items.
- Delaware
Adjustments for state & foreign income taxes,
charitable mileage, & self-employed health insurance.
- DC
Adjustments for state income taxes & certain
deductions passing to shareholder of small business
corporations.
- Georgia
Adjustments for state income taxes & expenses
connected with exempt income.
- Hawaii
Adjustments for state taxes & other items.
- Iowa
Adjustments for state taxes, charitable mileage, &
other items.
- Kentucky
Adjustments for state income taxes, charitable
contributions, & other items.
- Louisiana
Decreased by 50%.
- Maine
Adjustments for state income taxes & other items.
- Minnesota
Adjustments for state income taxes & other items.
- Missouri
Adjustments for state income taxes & cultural
contributions.
- Montana
Adjustments for state income tax, insurance expenses,
contributions, & other items.
- New York
Adjustments for state & foreign income taxes,
interest, & other items.
- North Dakota
Adjustments for state income taxes & medical expenses.
- Oregon
Adjustments for state income taxes, medical expenses,
& other items.
- South Carolina
Adjustments for state income taxes & other items.
- Virginia
Adjustments for state income taxes & other items.
Source: Louisiana Department of Revenue
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