Jim Beam Column: Lawmakers approve tax reform – American Press

Members of the Louisiana Legislature ended their special session Friday after quickly overwhelmingly approving eight tax bills that make up Republican Gov. Jeff Landry’s proposed tax reform plan.

The Senate began the day by introducing House Bill 10 to cap the 3% individual income bill to tie it to a 1% sales tax increase that would raise the state sales tax to 5%. The increase will continue for five years from January 1, 2025 to December 31, 2029, and from January 1, 2030 the tax will be 4.75%.

Louisiana already has the highest combined state and local sales tax in the country, and this change will increase it to 10.06%.

The fiscal note said the tax would generate $875 million by fiscal year 2026. These funds will be needed to help generate $1.3 million in personal income tax revenue that would be lost due to the flat tax.

Sen. Gerald Boudreau, D-Lafayette, said he would prefer to keep the bills separate, but that consolidation is only the first step. Lawmakers hope to eventually eliminate the income tax.

The Advocate reported that Senate President Cameron Henry, R-Metairie, said the two bills were combined to make it easier to get the two-thirds vote needed to pass the tax measure, since lawmakers who want tax cuts would have to vote to pay for this.

HB 2 set a flat corporate income tax rate of 5.5%, higher than Landry wanted. However, efforts to raise new revenue through sales taxes on 41 government services that are not currently taxed remain on the calendar. The current corporate income tax of 7.5% is the highest in the country.

HB 3 eliminates the corporate franchise tax, which most states do not impose because it is an income tax that discourages investment.

HB 5 is a permanent $2,000 pay increase for teachers and a permanent $1,000 increase for school support workers. The three education trust funds included in HB 7 would pay off some of the Louisiana Teachers’ Retirement System debt. This will save the money school districts pay on that debt, and those savings will fund two education enhancements.

HB 7 is a proposed state constitutional amendment that would reform Article VII, the financial section of the state constitution. It removes many clauses from the constitution and contains those three education trust funds that are necessary to improve the level of education.

Homestead property tax exemptions and state sales tax exemptions for food prepared for home consumption, utilities, and prescription drugs will remain in the constitution.

HB 8 is a state sales and use tax on certain digital products and services. It would generate $37 million annually beginning in fiscal year 2025-26.

HB 11 addresses special assessments and gives local governments the option to eliminate an unpopular inventory tax. If they opt out, they will receive a lump sum payment equal to three years of those earnings, capped at $15 million.

HB 12 addresses special government trust funds. It would require $280 million from the Transportation Trust Fund over two years to be used in the state’s general fund. However, this requires a $40 million contribution to the Megaprojects Leverage Fund for the construction of the new Interstate 10 bridge over the Calcasieu River in Lake Charles, which is already being prepared for construction.

Landry thought his original tax reform plan would move Louisiana up from 40th place.^th ranked eighth in the Tax Foundation’s Government Business Tax Climate Index. However, changes passed on Friday will allow the state to enter the top 20.

The governor planned to eliminate tax breaks for film production in Louisiana and for the renovation of historic buildings. Instead, the Senate cut the amount a state can spend in those two areas.

The lawyer said Landry and Richard Nelson, his secretary of the state Department of Revenue, wanted to expand the tax base by ending tax breaks and lowering tax rates. However, ending the tax breaks has proven difficult.

HB 7, the proposed state constitutional amendment, and other proposed amendments will be adopted by voters in the statewide election on March 29, 2025. Some of the proposed tax changes would not go into effect if voters reject HB 7.

HB 7 is a complex amendment that will require extreme clarification to voters. Some previous difficult attempts at tax reform have failed.

Jim Beamformer magazine editor American presshas covered people and politics for more than six decades. Contact him at 337-515-8871 or [email protected].