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Senate President Cameron Henry, R-Metairie, speaks before the Senate at the state capitol on Friday, November 22, 2024. Javier Gallegos State Sen. Mike Reese, R-Leesville, and Blake Miguez, R-New Iberia, speak at the podium before the Senate at the state capitol on Friday, November 22, 2024.
Javier Gallegos State Sen. Alan Seabaugh, R-Many, tells a joke on the Senate floor at the state capitol on Friday, November 22, 2024. Javier Gallegos Facebook Twitter WhatsApp SMS Email Print Copy article link Save Income taxes will drop, sales taxes will rise and a much-maligned tax on corporate assets will disappear under legislation approved by the state Legislature Friday that ends two weeks of debate on how best to refashion Louisiana’s tax system.
Final passage of the package during the special legislative session represents a major political victory for Gov. Jeff Landry, although lawmakers bowed to the pressure of special interests and scrapped major portions of his package that sought to eliminate tax breaks to simplify the complicated tax code. “It’s an exciting day for Louisiana,” said Rep.
Julie Emerson, R-Carencro, who sponsored major pieces of the legislation and helped shepherd the package through the House. Landry can point to the fact that a majority of Democrats joined Republicans in approving each bill in the package except one. Landry achieved his prize goal of getting legislators to scuttle the graduated individual income tax system — which has a current top rate of 4.
25% — for a single 3% rate as of Jan. 1. In conjunction, Louisiana will nearly triple the standard deduction for individual filers to $12,500 at the beginning of 2026.
To pay for the tax cuts, legislators had to swallow increasing the state sales tax to 5%, or 1% higher than if they had allowed a temporary sales tax to expire next year. The higher sales tax will last for five years and then drop to 4.75%.
Landry had sought to renew the expiring sales tax at just under a half-cent. Louisiana already had the country’s highest sales tax rate, and now a tax that hits the poor hardest will be even higher. Besides Landry, other political winners are Senate President Cameron Henry, R-Metairie, who led the way for the Senate to salvage the tax package after the House balked at approving a bill to extend the sales tax to 41 additional services.
This week, Henry shuttled from meetings with Landry, Senate Republicans, Senate Democrats and House Speaker Phillip DeVillier, R-Eunice. Another winner is Richard Nelson, the revenue secretary, the architect of Landry’s plan. Nelson, a former state representative from Mandeville, ran for governor last year but dropped out and supported Landry.
Corporate franchise tax repeal Besides the income tax and sales tax changes, legislators also agreed to Landry’s proposal to abolish the .275% corporate franchise tax, a longtime goal of the business community. The 84-16 vote in the House for House Bill 3 marked the only time Friday that a majority of Democrats did not support one of the tax bills.
The Senate approved the bill unanimously. The governor’s plan overall will reduce state tax collections and give the biggest dollar savings to the wealthy and large corporations, with Landry saying it will spark an investment boom that will raise family income and reverse the population loss that occurred while John Bel Edwards was governor. Whether families that earn less than $40,000 per year will receive a net tax reduction was not clear Friday, given the sales tax increase.
The House and the Senate breezed through the long list of tax bills Friday, with Democrats showing no fight – none went to the microphone to voice their concerns. The centerpiece of Landry’s package – House Bill 10 , which combined the income tax cuts with the sales tax increase – passed the Senate 38-1, with only Sen. Royce Duplessis, D-New Orleans, voting no.
HB10 passed the House, 80-19, with 18 Democrats and Rep. Beryl Amedee, R-Gray, voting no. She had said she had made a commitment to not raise the sales tax.
It would cut individual income taxes by $1.3 billion and raise $845 million in higher sales taxes. Legislators made up the difference by raiding an infrastructure fund and drastically reducing tax credits that companies can take on their inventory tax payments to parishes.
Landry sought to replace the three-tier corporate income tax system with a single 3.5% rate, but legislators established a single 5.5% rate.
That will reduce taxes for companies paying at the 7.5% rate, while those at the current lower two rates will receive a higher standard deduction to allow them to avoid having to pay more money, said Sen. Franklin Foil, R-Baton Rouge, who took a lead role in shepherding the package through the Senate.
Reducing the top corporate income tax rate – House Bill 2 – won passage in the Senate, 38-1, with Duplessis voting no, and in the House, 90-9. Democrats cast all the no votes. Film tax credit saved Landry wanted to eliminate several tax incentive programs that independent studies show produce a low return on investment for taxpayers.
But, after heavy lobbying, lawmakers kept the tax credits for film and TV productions and for renovations of historic property, although at a lower cost to the public. Also, Louisiana joined 44 other states in imposing taxes on digital goods such as streaming and games. Beyond all of those changes, Landry and legislators want to undertake a major rewrite of the state tax code.
That will now be up to voters on March 29. Voters will be asked to approve a complicated change to the state constitution that would give a permanent pay raise next year of $2,000 to teachers and $1,000 to support staff – by paying off $2 billion of teacher pension debt. The proposed constitutional amendment would also give parishes the option of repealing the property tax on business inventory, and would double the standard deduction for seniors, take most property tax exemptions out of the constitution and put their fate in the hands of legislators, impose a cap on annual spending and make it harder to create more tax breaks in the future.
The amendment also would merge two state savings accounts and, if passed, allow the governor to use some of that money to pay parishes to drop the inventory tax program. Remaining untouched are two popular tax items in the state constitution: the $75,000 homestead exemption and the sales tax exemption for the purchase of groceries, residential utilities and prescription drugs. Landry's goals In an interview Thursday morning, Landry said he had four goals when the special session began the day after this year’s presidential and congressional elections.
He wanted to raise teacher pay next year and ensure that Louisiana didn’t have a budget shortfall next year that would lead to cuts in vital government programs. Landry wanted to lift Louisiana’s standing in the State Business Tax Climate Index of The Tax Foundation, a Washington, D.C.
nonprofit favored by conservatives. Louisiana is currently 40th and would jump to eighth under the original version of his plan. Because of the changes by legislators, Louisiana would now land among the top 25, Foil said.
Landry also wanted to reduce the overall tax bite. In general terms, lawmakers are offsetting the reduction in income taxes with the increase in the state sales tax and other measures. The reduction comes from the repeal of the corporate franchise tax, which will save companies $530 million in the 2026/27 fiscal year.
The Landry administration says that won’t cause a budget shortfall and reduce services because revenue from the corporate franchise tax in recent years has flowed into one of the state savings accounts. But Jan Moller, director of Invest in Louisiana, a Baton Rouge nonprofit that favors a progressive income tax system, has said in recent days that eliminating that tax will reduce the money available for government programs because corporate tax revenue has been inflated in recent years. In the immediate aftermath of the special session, local governments emerged as clear winners.
They fended off Landry’s attempt to end their ability to impose sales taxes on the sale of machinery and equipment and on prescription drugs. The state does not tax those purchases. Landry was trying to follow the advice of The Tax Foundation, which has given poor marks to Louisiana’s sales tax system in part because of the complication of local governments imposing sales taxes on some purchases that the state does not tax.
Needing more money to pay for the income tax cuts, lawmakers voted to not direct $280 million in vehicle sales taxes for two years to three major infrastructure projects: to extend Interstate 49 in Lafayette Parish, to complete the four miles of unbuilt highway on Interstate 49 just south of downtown Shreveport and to build a new bridge over the Mississippi River in metro Baton Rouge. Spending to replace the Interstate 10 bridge over the Calcasieu River will continue. Along with jettisoning Landry’s proposal to extend the sales tax to services, legislators also backed down from trying to revamp tax rates f or oil and gas production .
Along a similar vein, state Rep. Roger Wilder, R-Denham Springs, withdrew his bill to triple the tax on sports betting. A group associated with Davante Lewis, a Democratic member of the Public Service Commission, has sent text messages and posted Facebook ads criticizing those who voted for the sales tax increase.
In the final minutes of the special session, Rep. Steven Jackson, D-Shreveport, criticized the tactic, saying Democrats shouldn’t face criticism if they support good ideas from a Republican governor..
