Final deal for tax reform may not be the end of the battle
2nd December 2024 · 0 Comments
By Christopher Tidmore
Contributing Writer
Gov. Jeff Landry accepted a compromise negotiated by key Louisiana senators, including Revenue & Fiscal Affairs Chairman Franklin Foil of Baton Rouge, which traded a smaller than expected corporate income tax cut (reduced 5.5% rather than the hoped for 3.5%) and a larger than expected increase in the sales tax rate (upped to one cent rather than renewing the .45 cent alone).
In exchange, the governor achieved his sought for income tax reduction from 4.25 to a flat three percent rate, but he failed at his objective to apply sales taxes to a myriad of goods and services previously untaxed – with the exception of new online levies such as on streaming services like Netflix.
Landry also was unable to achieve his goal of removing sales taxes on prescription drugs, due to opposition from local parishes who depend upon their portion of that revenue, nor could he get rid of sales taxes on machinery and equipment, a key priority of business constituencies. CEOs had to settle for the elimination of the corporate franchise tax, which was a long time goal of the business community.
However, the fight for a lower corporate tax may not be over. Senior legislative sources tell The Louisiana Weekly that the governor may make another run at passage of HB9, the legislation which would place sales taxes on more than 40 goods and services currently untaxed. Coastal legislators particularly balked at the proposal to charge taxes for storage of boats 50 feet and under, a cultural redline in fishing communities along the Gulf. Several other of his proposed taxes were thought to affect insurance rates, a sensitive subject in the current economic climate, hence that alacrity with which even Louisiana Senate Democrats (with the exception of Royce Duplessis of New Orleans) all voted for a much higher basic sales tax rate.
Sources reveal that Landry plans to re-introduce a similar piece of legislation to HB9 during the upcoming 2025 Regular Fiscal Legislative Session, revisiting at least some of the sales tax exemptions in order to pay for a rate closer to a 3.5 percent corporate rate. Landry noted a TaxFoundation.org study which calculated that his original overall reform plan would have propelled the Pelican State to 8th in the Tax Foundation’s State Tax Competitive Index. At 5.5 percent, the state’s overall rank would rise to only 26th.
The 2025 Regular Legislative Session will convene at noon on Monday, April 14, 2025, with Final Adjournment no later than 6 p.m. on Thursday, June 12, 2025. However, part of Landry‘s legislative package will go before the voters first – just not the tax changes – on March 29. Legislators put a proposed constitutional amendment on the ballot by approving House Bill 7, sponsored by Rep. Julie Emerson of Carencro. The Senate voted unanimously in favor of HB7, while the House vote was 87-11, with Democrats supplying all the no votes. And the measure is multifaceted.
The proposed amendment replaces a one-time $2,000 pay hike for educators last year with a permanent $2,000 pay raise next year – by paying off $2 billion of the teacher retirement system debt and then by using the freed capital to fund the pay raise. School support personnel also would see the one-time $1,000 pay raise they received last year replaced with a permanent $1,000 pay increase next year. The proposed amendment further grants parishes the option of repealing the property tax on business inventory, removes most property tax exemptions out of the constitution (putting their continuance in the hands of legislators), imposes a cap on annual spending, and puts legislative roadblocks in place for the creation of new tax breaks in the future.
The proposed constitutional amendment also merges two state savings accounts, and, if passed, would allow Landry to use some of that money to reimburse parishes who opt to drop the inventory tax program. Lastly, it doubles the standard deduction for seniors on their income taxes.
Nevertheless, should voters reject the constitutional amendment, the tax changes made by the Legislature will remain unchanged.
This article originally published in the December 2, 2024 print edition of The Louisiana Weekly newspaper.
