Louisiana lawmakers pass income and corporate tax cuts, raising statewide sales tax to pay for it

Louisiana’s GOP-led legislature passed significant tax reforms, combining income and corporate tax cuts with a sales tax increase. This package, championed by Gov. Jeff Landry, aimed to create a more business-friendly environment and address outward migration trends. Critics argued the reforms primarily benefit wealthy taxpayers and corporations while burdening low-income households due to the regressive nature of sales taxes.

The personal income tax reforms introduced a flat 3% rate, replacing the tiered system and reducing taxes by $1.3 billion annually. Standard deductions for seniors and individuals were increased, effectively exempting low-income households from income taxes. To offset the revenue loss, $280 million was redirected from infrastructure projects.

On the corporate side, the corporate income tax was reduced to a flat 5.5%, down from a maximum of 7.5%. Lawmakers also repealed the corporate franchise tax, which had been criticized as a penalty on high-revenue businesses. Supporters argued these changes made Louisiana more attractive to job-creating companies.

To balance the tax cuts, the state sales tax was increased to 5% from 4%, with a planned decrease to 4.75% by 2030. However, Louisiana’s combined sales tax rate remains the highest in the nation at 9.56%. Critics warned that the sales tax hike disproportionately impacts low-income households, exacerbating the state’s already regressive tax system.

The reforms also included proposed constitutional amendments, set for a March 2025 vote. These changes would remove protections for certain tax exemptions, enable a $2,000 permanent raise for teachers by liquidating education trust funds, and impose a growth limit on state spending. While the reforms were controversial, most Democrats supported the package to influence its final shape, preserving programs like the film industry tax credit. Gov. Landry called the reforms a generational shift for Louisiana, though opponents warned of negative impacts on the state’s lower-income residents.

For more information see Jack Brooks and Kevin McGill “Louisiana lawmakers pass income and corporate tax cuts, raising statewide sales tax to pay for it” AP News, November 22, 2024.