(AP) BATON ROUGE, LA Governor Jeff Landry of Louisiana is promoting ambitious plans to simplify the state’s intricate tax structure in order to lower business and income taxes. However, in response to concerns expressed by legislators, lobbyists, and local governments, a Senate committee on Tuesday offered significant revisions to the comprehensive reform plan.
What is the goal of the tax reform?
The plan is presented by Landry and his supporters in the Republican-controlled legislature as a means of simplifying the tax structure and making it more business-friendly.
They claim that Louisiana’s economy will grow if the corporate income tax is lowered and the 0.275% corporate franchise tax, which is a levy on businesses doing business in the state and costs more than $500 million a year, is eliminated. In order to maintain Louisiana’s competitiveness with neighbors like Texas, which does not impose an income tax, they also seek to lower the individual income tax to a flat 3%.
The proposed reform would impose taxes on digital goods and services, such as streaming websites, with an expected yearly income increase of $40 million. Additional adjustments would free up funds for senior income tax exemptions and teacher pay increases.
What is the source of the opposition?
During a special session that must be completed in three weeks, local governments, MPs from both parties, and special interests from lobbyists for petrochemicals to the film industry have all opposed the proposed legislation.
Democratic Representative Mandie Landry, one of the most outspoken opponents of the tax bill, stated, “I think pretty much everyone thinks this is too much in too little time and too fast and that there could be huge repercussions.”
Despite Landry’s assurance that they will be compensated, some local governments have issued warnings about a large loss of revenue. According to Tax Administrator Betty Jo Bourgeois, Rapides Parish in Central Louisiana would lose over $20 million in revenue as a result of the changes, even with the new revenue sources included in the proposed tax package.
On Tuesday, the Senate Revenue and Fiscal Affairs committee approved an amendment that permits local governments to keep collecting prescription medication taxes, a significant source of funding that was initially under threat. However, Bourgeois stated that she is still uncertain about the future of her parish.
In addition, the tax reform bill initially called for the elimination of tax credits for historic property development and film production. In response to the outcry of film industry executives, the Senate committee decided to keep both tax credits in place, albeit with modest cutbacks.
at order to save the oil and gas sector tens of millions of dollars, the Senate committee decided to maintain tax reductions at so-called foreign trade zones at Louisiana ports.
A tiny number of Democratic members have voted against the tax plan, arguing that it will disproportionately benefit corporate owners and burden lower-income households more than others. A 2024 assessment by the left-leaning Institute of Taxation and Economic Policy currently ranks Louisiana’s tax system as the eighth most regressive in the nation.
Most crucial to the overall success of the tax reform bill is the fact that several Republican members have resisted the addition of sales tax to new services and have so far declined to sign on to the parts of the package that raise revenue.
What comes next?
To fill the $1.3 billion yearly revenue gap caused by the planned income tax cuts, lawmakers must find a method to balance the state budget.
A crucial bill to extend the sales tax to 42 new services, such as car washes, need the support of perhaps six or seven Republican members in order to receive the two-thirds majority required to pass. However, the legislation’s sponsor, Rep. Neil Riser, claims that the bill has been stuck in the House since last Thursday.
Riser has suggested reducing the number of services subject to taxation to 19 in an effort to appease the skeptics.
There hasn’t seemed to be much interest in extending sales taxes to other services here, according to Senator Franklin Foil, the chair of the Revenue and Fiscal Affairs committee.
Although the governor had preferred a flat 3.5% rate, the Foil’s committee also suggested on Tuesday lowering the top tier corporate income tax rate from 7.5% to 6%.
According to Foil, raising the statewide sales tax to 4.50% is an additional way to generate income. Landry had suggested maintaining a temporary 0.45% sales tax hike that would expire the next year in order to keep the rate at 4.45%.
The Tax Foundation, a conservative think tank, claims that Louisiana already has the highest average local and state sales tax rate in the nation, at 9.56%.
Even if the sales tax were to be raised and stretched to cover it, Foil said he thought that lowering the income and corporate income tax rates would be a positive step for the state.
“We will have to make a decision,” Foil stated.
___ Brook is a member of the Statehouse News Initiative’s Report for America/Associated Press corps.A nonprofit national service initiative called Report for America places reporters in local newsrooms to explore topics that aren’t often covered. Follow Brook at @jack_brook96 on social media site X.
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