The Louisiana legislature, dominated by the GOP, recently approved tax cuts on personal and corporate income. This decision came after a special legislative session initiated by Governor Jeff Landry aimed at making the state's tax code more business-friendly and reversing outward migration trends. The tax reforms, which were described as 'historic' by Landry, include a flat 3% individual income tax rate, resulting in a $1.3 billion cut. The previous personal income tax rate of 4.25% for individuals earning $50,000 or more was reduced.
Lawmakers also passed a flat 5.5% corporate income tax rate, down from the previous highest tier of 7.5%. Additionally, they eliminated the 0.275% corporate franchise tax, which was criticized as a penalty on businesses. These measures were seen as crucial for attracting job-generating companies to Louisiana and improving the state's business climate.
As part of the legislative package, the standard deduction for seniors was doubled, and for individuals, it was nearly tripled, effectively eliminating income tax for the lowest-income households. However, critics raised concerns that the tax reforms would primarily benefit corporate shareholders and wealthier taxpayers, while the sales tax increase would worsen the state's regressive tax system.
To offset the revenue loss from the income tax cuts, lawmakers approved a statewide sales tax increase to 5%, with a reduction to 4.75% planned for 2030. This move was met with opposition from various groups, as Louisiana already had the highest combined state and local sales tax rate in the country. The tax reform package also included a constitutional amendment that aims to give lawmakers more flexibility in ending tax exemptions and implementing a growth limit on state spending.
Overall, the tax reforms in Louisiana have sparked debates about their impact on different income groups and the state's economic future. While supporters believe the changes will attract businesses and create jobs, critics argue that they may disproportionately burden low- and moderate-income families. The final decision on these tax measures will now go before voters for approval on March 29.
