Louisiana Gov. Bobby Jindal pledged earlier this month to support a Senate bill that would reduce the state income tax to the rate in use before voters approved the so-called Stelly tax increase plan in 2002, but the effective date of the rollback has been called into question.
The Stelly plan, which raised the income tax rate while eliminating the sales tax on food, was named after its sponsor, Rep. Vic Stelly, R-Moss Bluff.
Jindal said at a news conference on May 14 that the new income tax rates would go into effect Jan. 1 with new payroll withholding tables from the Department of Revenue. Revenue Secretary Cynthia Bridges said last week that the department hopes to have the tables ready by January, but that the new withholding rates will not be official until July 2009, so the agency can educate employers about the change.
Bridges said individual taxpayers could ask their employers to use the lower rate beginning in January, but employers would not have to automatically recalculate withholdings until the rates are officially implemented.
“This is real tax relief that working Louisianans will notice in their paychecks starting January 2009,” Jindal said at the news conference. “The elimination of the Stelly tax increase means over $300 million in lower taxes next year — more than a billion dollars in tax relief over the next five years — and more money in the hands of families who will do a better job spending their money than the government would.”
SB 87, sponsored by Sen. B.L. “Buddy” Shaw, R-Shreveport, would lower the tax rate for individual incomes between $25,000 and $50,000 from the current level of 6% to the pre-Stelly level of 4%. Married couples filing jointly would pay 4% on income between $50,000 and $100,000. Single filers would save approximately $500 a year with the lower rate, with married couples realizing a $1,000 annual saving.
SB 87 has been approved in the Senate and is awaiting action in the House.
An estimate by the Legislative Fiscal Office said Shaw’s measure would cut state revenues by $62 million in fiscal 2009 if the lower rate is effective in January.
House Speaker Jim Tucker, R-Algiers, who appeared with Jindal and Shaw at the news conference announcing the proposed tax cut, has sponsored an amendment to Shaw’s bill directing the Revenue Department to use the current withholding tables until July 1, 2009.
