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

Constitutional Changes

Constitutional changes were made to allow for the implementation of the tax cuts and sales tax hike.

The tax reform package includes a significant rewrite to Article 7 of the state’s constitution.

This amendment removes large amounts of tax exemptions from constitutional protection, giving lawmakers more latitude to end these exemptions in the future.

Quotes

• “Louisiana just became a much more attractive place to do business.” – Louisiana Economic Development Secretary Susan Bourgeois

• “Today we have made generational change in this state. We now stand at the threshold of a new era for Louisiana.” – Gov. Jeff Landry

• “I think it will ensure that low- and moderate-income families continue to pay a higher effective tax rate in Louisiana than those at the very top.” – Jan Moller, executive director of Invest in Louisiana

• “All of those changes represent what’s best for the state, and they’re now in a document — that was not previously there.” – Sen. Minority Leader Gerald Boudreaux

Overview

The changes aim to make the state’s tax code more business-friendly, create jobs, and reverse trends of outward migration.

Key Provisions

• A flat 3% individual income tax rate was approved, leading to a $1.3 billion cut.

• The personal income tax rate had previously stood at 4.25% for people earning $50,000 or more.

• Lawmakers also passed corporate tax cuts.

• The sales tax will be raised to 5%, equivalent to an increase of one cent on every dollar spent.

Criticism and Controversy

Critics argue that the tax reforms will primarily benefit corporate shareholders and wealthy taxpayers while exacerbating Louisiana’s regressive tax system.

The sales tax increase is expected to disproportionately affect poorer households, who already pay a higher percentage of their income on taxes.

Republican Leaders’ Perspective

Republican leaders maintain that the increased sales tax will not cancel out the benefits of the income tax cut for lower- and middle-income families.

They argue that consumption-based taxes are fairer and that the changes will ultimately lead to the elimination of the income tax in the future.