Louisiana’s GOP-dominated legislature passed tax cuts on personal and corporate income on Friday in exchange for a statewide sales tax increase, a mixed bag of success for Gov. Jeff Landry, whose original tax revision plans faced mounting resistance from lawmakers and lobbyists amid hard fiscal realities.
The final passage of the bulk of Landry's proposed measures winds down a special legislative session called Nov. 6 by the governor and his allies. They said their purpose was to make the state’s tax code more business friendly, bring jobs and reverse trends of outward migration from the state. It was the third special legislative session called by Landry, a Republican, since he assumed office in January.
The package of legislation includes a permanent $2,000 raise for teachers and doubles standard deductions for residents aged 65 and older. It raises the state sales tax to 5%, while granting Landry’s wish for lower personal and corporate income tax rates. It repeals the 0.275% corporate franchise tax, a levy on businesses operating on the state worth more than $500 million in annual revenue.
The state's new corporate income tax rate will be a flat 5.5%, reducing the highest tier from 7.5%. Landry had wanted a 3.5% flat rate.
Lawmakers approved a flat 3% individual income tax rate and nearly tripled the standard deduction for individuals. Previously, the personal income tax rate had stood at 4.25% for individuals earning $50,000 or more.
“What I’m very confident in is that everyone’s going to have more money in their pocket at the end of the day with the personal income tax reductions,” said Republican Rep. Julie Emerson, who spearheaded legislation to flatten the income tax rate.
With the personal income tax reductions reducing annual revenue by $1.3 billion, Landry’s original plan had called for applying sales taxes to dozens of services like car-washing, dog-grooming and lobbying. He also sought to eliminate large tax incentives for the restoration of historic buildings and the film industry.
Those proposals were defeated, leading to a bigger sales tax hike than Landry initially proposed.
Louisiana already had the highest combined state and average local sales tax in the country at 9.56%, according to the Tax Foundation, a think tank favored by conservatives.
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Associated Press writer Kevin McGill contributed to this report.
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_____ Brook is a corps member for The Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places journalists in local newsrooms to report on undercovered issues. Follow Brook on the social platform X: @jack_brook96
