Louisiana Speaker of the House Phillip DeVillier, R-Eunice, left, and Senate President Cameron Henry, R-Metairie, speak in the Louisiana House of Representatives on the opening day of a legislative special session, Wednesday, Nov. 6, 2024, at the Louisiana State Capitol in Baton Rouge (Hilary Scheinuk/The Advocate, Pool)
State lawmakers have agreed to a pared-down version of Gov. Jeff Landry’s tax overhaul package but one that would still affect most people and businesses in Louisiana. The deal, hashed out in back-room negotiations Thursday, is expected to receive full approval Friday.
“A lot can change overnight, but as of right now, we’re comfortable with the number of votes we have…in the Senate,” said Senate President Cameron Henry, R-Metairie.
“I believe we have the votes [in the Louisiana House],” Speaker Pro Tempore Mike Johnson, R-Pineville said.
The revised package calls for pushing the current sales tax rate of 4.45% to 5% for five years, starting July 1, 2025, when the state’s next fiscal year starts. It would drop to 4.75% in 2030 but still remain higher than the current 4.45% rate.
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In exchange for these higher, permanent sales taxes, most Louisiana residents would receive an income tax cut. The state would move from a three-tiered income tax system with a high rate of 4.25% to a flat rate of 3% accompanied by a significantly higher standard deduction threshold.
On the business side, the corporate franchise tax will be eliminated altogether, and the corporate income tax would move to a flat rate of 5.5% — right between the current lowest rate of 3.5% and highest rate of 7.5%.
The Legislature has also agreed to dissolve some government funds dedicated to special purposes and end some business and industry tax breaks to shore up state revenue. This includes ending the state’s many incentive programs such as the Quality Jobs and Enterprise Zone tax credits, among others..
A portion of the state inventory tax credit, which helps businesses cover their local parish tax bills, will be phased out for some employers in 2026. Money from the vehicle sales tax that was going to large transportation projects – such as the new Baton Rouge Interstate 10 bypass bridge and Interstate 49 expansions – will now be diverted for general government expenses.
In an interview Thursday night, Henry said he did not expect the current deal to leave Louisiana with a significant budget shortfall as some had feared. Still, lawmakers held off on taking votes on the tax package until Friday because they are waiting for the final revenue estimates to be finished by staff.
“Staff needs the time … . And we want time to read and digest the bills before we vote,” House Republican Caucus Chairman Mark Wright, R-Covington, said.
Landry was also throwing a political fundraiser Thursday night in Baton Rouge, and any tax votes taken before Friday would likely have coincided with the event.
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Legislative leaders are also combining the bill that cuts income taxes with the legislation to increase sales taxes in order to pin down conservative Republican votes. Once the proposals merge, lawmakers will no longer be able to vote for the tax break without the corresponding tax hike.
“It’s to lock people in. You can’t vote for the tax cuts without voting for the revenue, too,” said Sen. Gerald Boudreaux of Lafayette, chairman of his chamber’s Democratic Caucus.
Republicans have supermajorities in the Senate and House, but Democrats will be needed to reach the 70 votes required to pass the sales tax hike legislation. Certain conservative Republicans have refused to vote for any bill that included a tax hike, which means bipartisan support becomes even more important to get the package across the finish line.
Much of the negotiations over the past two days has taken place between Landry and Senate Democrats, who had reservations about raising Louisiana’s sales tax rate to pay for an income tax reduction.
Louisiana already has the highest average sales tax rate in the nation when local parish rates are included. High sales taxes are more of a burden for poor people, who end up spending more of their paycheck to cover their cost.
Boudreaux said Democrats were given some concessions for agreeing to support Landry’s tax package. They were assured certain health care services wouldn’t be cut, and funding for early childhood education and juvenile vocation programs would be prioritized, he said.
The state funding formula for higher education might also be reworked to direct more support to Louisiana historically Black colleges and universities, according to Boudreaux.
The votes appear to be on tight margins, however.
Wright, as the head of the House Republican Caucus, expressed concern that the Legislature would start “losing people” who would vote for the tax bills the longer they waited to vote on Friday. Some lawmakers have made it clear they don’t intend to push their holiday travel to support the tax overhaul.
The special session must end by 6 p.m. Monday.
“It’ll be interesting because I heard they may have more Republicans missing as the day goes on, especially around five o’clock,” said House Democratic Caucus Chairman Matthew Willard of New Orleans, who has opposed Landry’s proposal.
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