Louisiana Department of Revenue Secretary Richard Nelson and state Rep. Julie Emerson, R-Carencro, testify at a House Ways & Means Committee hearing on Nov. 8, 2024. (Photo credit: Wes Muller/Louisiana Illuminator)
Gov. Jeff Landry’s proposed tax policy revamp went through further changes Tuesday in the Louisiana Legislature, with lawmakers countering a reduction to an individual flat income tax with an increase in what businesses would pay.
In addition, members of the Senate Revenue and Fiscal Affairs Committee tossed the governor’s plan to stop local governments from taxing prescription drug sales, and they also voted to keep in place tax credits for movie and television production, historic restoration and digital media.
What new purchases and services the state sales tax will apply to are expected to be ironed out on the Senate floor, where lawmakers will have to sort out a slew of amendments added to multiple bills during the committee meeting and then send everything back to the House for consideration — all in less than a week.
As the package heads to the upper chamber, lawmakers have gelled behind a 4.4% sales tax rate – 0.05% lower than the current rate , effective July 1. The same bill also makes permanent a discounted sales tax rate of 2% on energy utilities for commercial customers that is set to expire at midyear 2025.
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The extensive Senate committee changes to the Landry tax package offer no real insight on whether lawmakers are closer to finding middle ground with the administration. Their original proposal, in essence, balanced a reduction in income tax revenue with expanded sales taxes.
But the House of Representatives adjourned Tuesday afternoon without considering the only proposal currently on its calendar, House Bill 9, that would expand the state sales tax to nearly 20 new items and services. It remains to be seen whether this piece of the revenue puzzle is vital to the core of Landry-backed bills the Senate Revenue and Fiscal Affairs Committee advanced.
They include House Bill 1, which sets a flat income tax for individuals at 3%. House Bill 2 was updated to increase the flat income tax rate for businesses from 5.5% to 6%. Proponents of the change say it’s still a competitive rate when compared to other southern states’ corporate taxes.
The author of both proposals, Rep. Julie Emerson, R-Carencro, wanted the flat tax rates to drop further when state tax revenue reached certain benchmarks, but the Senate committee removed “triggers” from both of her bills that would have allowed that to happen. After Tuesday’s committee amendments, the Legislature would have to approve any future flat income tax rate reductions.
The committee’s restoration of motion picture tax credits came after film industry representatives flooded Capitol corridors Sunday afternoon to stress the importance of the incentive to lawmakers. Adjustments made Tuesday lower the annual cap on credits from $150 million to $125 million.
The committee also scrapped a proposal that would have prohibited local governments from taxing prescription drugs, a concession to elements of the governor’s plan that could reduce parish and city tax collections.
Members also backed giving parish councils, school boards and sheriffs the power to lower business inventory taxes on their own, as long as they all are in agreement. Rep. Daryl Deshotel, R-Marksville, said the change to House Bill 11 would allow parishes to be more competitive with their neighbors should they decide to forego the same tax.
Deshotel also updated his proposal to keep the homestead exemption in the Louisiana Constitution. That means any changes to the property tax break from primary residences would need approval from voters statewide. When the House of Representatives approved the bill, it would have moved the homestead exemption into state code, where only a two-thirds vote of the Legislature could have altered the tax break, and voters would have had no say in the matter.
Leaving the homestead exemption untouched and dropping the personal flat income tax rate might indicate lawmakers and the governor are doing what it takes to make his plan more palatable to voters. They get the final say in the form of a constitutional amendment ballot measure next year.
Another enticement they’ve offered is a permanent teacher pay raise, made possible through paying off teacher retirement system debt.
Both chambers will convene again Wednesday morning, facing a 6 p.m. Monday final adjournment deadline. All changes made to House bills in the Senate will have to be agreed upon before then.
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