Removing or reducing deduction "a terrible idea", would have same effect as raising state income taxes, state treasurer says
State Treasurer John Kennedy says he thinks it would be a "huge mistake" and a "terrible idea" for lawmakers to change the state's tax code to disallow the deductibility of federal income taxes from state income tax returns - to offset the anticipated loss in state revenue from the fiscal cliff deal.
"If you remove or reduce the deductibility of federal income taxes from state income tax (returns), that's the same thing as increasing state income tax, it has the same effect," Kennedy told 99.5FM Wednesday.
The fiscal cliff deal approved by Congress and signed by the President reportedly could lead to a $20 million dollar decrease in state revenue in Louisiana.
The Times-Picayune reports that while an estimated 15,000 to 20,000 Louisiana residents will pay an estimated $400 million dollars more in federal income taxes, state revenues will decline because those taxes can be deducted from state income tax returns.
Individual income above $400,000 will now be taxed at a rate of 39.6% instead of 35%.
Members of the Louisiana legislature are expected to discuss possible changes in the state's tax code when they meet this spring.
Some have suggested that lawmakers need to evaluate the deductibility of federal income taxes.
But Treasurer Kennedy says, "This idea of raising state income taxes will just be like throwing gasoline on the fire in my opinion. Our problem is not revenue. Our problem is spending."