FILE - Louisiana State Capitol

The Louisiana state Capitol in Baton Rouge, La.

(The Center Square) — The Louisiana House Ways and Means Committee held the first in a series of meetings on Tuesday to discuss the state's tax structure, with a focus on eliminating the state's income tax.

Lawmakers during the 2022 legislative session approved House Resolution 178, which authorizes the House Ways and Means Committee to study Louisiana's tax structure "and to make recommendations concerning eliminating the state tax levied on individual and corporate income and reforming state tax exemptions and credits."

HR 178 is sponsored by Rep. Richard Nelson, R-Mandeville, who told the committee on Tuesday that "when you look at the state and you look at the trajectory, where we're going, … the tax structure in Louisiana is one of the fundamental things that's holding us back."

"We have an opportunity now to actually build a better mousetrap so we can move the state forward in the future," he said. "I think eliminating the income tax and completely restructuring how we do business here in Louisiana is probably the most important way we can move this forward."

Representatives from the Department of Revenue testified on a variety of aspects of the current tax system, as well as the lengthy history of prior attempts to study and reform it.

Rep. Phillip DeVillier, R-Eunice, questioned how a constitutional amendment to remove the federal income tax deduction on the state side in 2021 has impacted revenues.

"This is the first year that has been done, so we don't have any type of historical data," Louisiana Secretary of Revenue Kevin Richard said. "By the time the session happens, those first returns should be coming in. I don't know if we'll have data by the time the session commences, but it is something we're looking at."

Luke Morris, the department's deputy secretary, said officials won't know whether the tax changes are revenue neutral as hoped until November of next year because of an automatic extension in the law.

"We will not have a good estimate until that time," he said, adding that some will see tax increases and others tax decreases from the constitutional amendment.

DeVillier also questioned revenues collected from taxes on online sellers.

Since the department started officially collecting sales taxes from remote sellers in July 2020, a commission set up to collect the tax has taken $815 million in state and local taxes. After a 1% collection fee, the state received $384 million and the local portion was $423 million, Morris said.

Nelson questioned whether eliminating exemptions for taxes for a broader base, while lowering the rate, would be preferable to the current system with many exemptions, smaller tax base and higher rate.

Officials noted that Louisiana has the highest combined state and local sales tax in the nation, tied with Tennessee, which does not have an income tax.

Richard told the committee the department is currently studying how a broader sales and use tax, such as in neighboring Texas, could increase revenues, but agreed "if you have a simpler system, then it's easier to administer a tax."

"Simpler is always better," he said.

Lawmakers also questioned revenues from the state's corporate income tax, which officials said collected $809 million, with $1.46 billion in exemptions.

"We basically exempt twice as much as we collect," Nelson said.

Deborah Vivian, economist from the Legislative Fiscal Office, also testified at Tuesday's meeting, where she warned lawmakers about the potential ramifications of making big changes to the tax system.

Vivian highlighted the unknown impact from recent tax changes, a temporary flood of federal money, a volatile inflationary economy, and the unpredictable impact to other areas of the budget for lawmakers to consider.

"When you budget, you step back and you're looking at the entire general fund, so it matters … what's happening with everything else, because it's never static," she said.

Committee Chairman Rep. Stuart Bishop, R-Lafayette, said the "daunting task" of reviewing Louisiana's tax structure will continue with a subcommittee chaired by DeVillier that's expected to meet every other week until the 2023 session convenes on April 10.

"It is going to be a very big task," he said.