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May 26, 2011 11:31 PM by Shawn Kline

How other states do without income tax

A bill making its way through Baton Rouge would phase out state income tax over the next five years.
Currently, Louisiana gets $2-billion to $3-billion dollars a year from state income tax.
State Treasurer John Kennedy says to get rid of the tax, Louisiana needs to spend less.
Kennedy suggests eliminating 15-thousand state government positions over three years by not filling many vacancies and getting rid of some of the 19-thousand consulting contracts.

"If you eliminate the personal income tax, it would help immensely in terms of us competing with other states." Kennedy says, "but you've got to balance it with a spending reduction plan, which I've given the legislature. They either need to implement my plan or another like it."

Kennedy says eliminating a state income tax would make Louisiana more attractive to people looking for a place to live or start a business.

But how do other states without an income tax make-up for lost revenue? Take a look at our neighbors to the west.

A lot of things change when crossing the border into Texas.

"Everything is bigger in Texas," Raymond Hughes said.

Texas isn't only bigger in area and population, but it also runs a bigger budget.

KATC's Shawn Kline asked Hughes, "how much income tax is taken from your paycheck?"

"Texas doesn't have a state income tax," he said. "The only tax I have taken out is federal income tax."

Hughes lives and works in Orange County, Texas and he doesn't pay a dime in state income tax.
Texas Comptroller Spokesman RJ DeSilva explains how the state does it:

"The state's operations are funded through a variety of (other) taxes," he said. "The major tax the state gets its revenue from is the sales tax."

Texas is just one of nine states without an income tax. The others being Alaska, Florida, Nebraska, Nevada, Washington and Wyoming. Tennessee and New Hampshire only tax dividend and interest income.

Here in Louisiana, the state takes anywhere from two to five percent from our paycheck but state officials are considering just doing away with income tax like Texas.

However, all that money (the $3-billion mentioned before) helps pay off Louisiana's debt in the Bond Security Redemption Fund. Whatever is left, goes to the General Fund to help fund other government agencies like the DOTD, but in Texas, sales tax (about 6.3% statewide, higher in metro areas) and property tax do the same thing- and their roads run just as smooth.

The question now is; is it worth paying the state in some other way?
Here's the Texans' viewpoint:

"I don't want a state income tax," Hughes said. "I already pay a lot of taxes in the state of Texas."

A final piece of history for this story:
Texas has never had income tax and Louisiana State Treasurer John Kennedy is one of the leaders in the "no income tax movement" in the Pelican State.
However in Texas, there is no state treasurer.
The last one was Martha Whitehead, who won the position in 1996 promising to remove her own position. She did just that shortly after winning the election.



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