The expiration of the federal income-tax cuts put into place in 2001 and 2003 could reduce the amount Louisiana collects from its income tax by between $30 million and $120 million a year, beginning in fiscal 2012.
Greg Albrecht, chief economist for the Legislative Fiscal Office, told the Revenue Estimating Conference earlier this week that higher federal taxes could hurt revenue because Louisianans can deduct federal income taxes from their state income tax liability.
When federal income tax rates go up, he said, Louisiana’s tax base is reduced.
If all the federal tax cuts were to expire in January, Albrecht said, the lost state revenue could be between $120 million and $125 million.
If the tax cut, enacted under President George W. Bush, is maintained only for families with an income of less than $250,000 a year, the state would see an annual revenue decline of between $30 million and $40 million, Albrecht said.
Congress is currently considering whether to allow all the cuts to expire as provided in the original legislation, or follow President Obama’s request to extend only the middle-class tax cuts.
“We’re waiting and watching,” Albrecht said.
The state is expecting a $2 billion shortfall for fiscal 2012. State agencies have been asked to prepare for a 35% reduction in their fiscal 2012 budgets.
