Louisiana Gov. Jeff Landry prepares to provide the introduction of his tax reform package to the Louisiana House Ways and Means Committee on November 7, 2024.
Here is an update to the table we presented in our prior feature entailing the composition and status of Gov. Landry’s tax reform package in the current Special Session of the Legislature:
| Legislation (as broadly amended) | Total Estimated 5-Year Fiscal Impact and Votes [numbers in parenthesis ( ) represent negative impacts on Louisiana's finances and numbers not in parenthesis represent positive impacts on Louisiana fiscal affairs, i.e. typically more tax revenue.] |
|---|---|
| HB-2. Lowers corporate tax rate from 7.5% to 5.5%. | ($29 million). [VERY heavily front-end loaded due to exemptions which can still be claimed for a couple more years but which will expire in later years, at which time significant positive cash flow impacts are expected (see yearly breakdown on linked fiscal note above). That fact cannot be sufficiently stressed due to its importance in offsetting lost revenue from eliminating Corporate Franchise Tax (see next bill)]. Votes. |
| HB-3. Repeals corporate franchise tax. | ($1.9 billion). Votes. |
| HB-4. Appropriates supplemental funding for Fiscal Year 2024-2025. Provides for net increases out of Statutory Dedications by $3,481,010. This is the cost of March 29, 2025 special election for Constitutional Amendment. | No Impact. Votes. |
| HB-5. Funds $2,000 PERMANENT (not a stipend contingent on annual Legislative approval) teacher pay raise via paydown of Teacher Retirement Unfunded Accrued Liability (UAL). | No impact. Votes. |
| HB-6. Calls for Special Election on March 29, 2025 for Constitutional Amendment. | ($3 million) Cost to conduct March 29, 2025 special election for Constitutional Amendment. Votes. |
| HB-7 Constitutional amendment to be voted upon by voters on 3/29/25 which covers considerable ground, but the main features are the $2,000/year teacher pay raise and providing an added Standard Deduction for Louisiana Taxpayers who are 65+, upping that Deduction to $25,000. | (In the range of $850 million). Vast majority comes from Statutory Dedications, so no meaningful impact on state general fund operations. Votes. |
| HB-8. Levies a tax on certain digital services (Netflix, etc.) | $169 million. Votes. |
| HB-10. [Fully absorbs former HB-1]. As per our suggestion of 11/16/24, extends "clean penny" sales tax [for five (5) years]. Also compresses three personal income tax brackets into one 3% bracket and ELIMINATES THE LOWEST TAX BRACKET FOR ALL TAXPAYERS IN THE PROCESS. Further, increases the Standard Deduction from $4,500 to $12,500. | $417 million. Votes: HB-1 (pre merger); HB-10. |
As clearly illustrated in the above table, HB-9 is now causing severe heartburn in the Louisiana House of Representatives. Accordingly, since Gov. Jeff Landry indicated to lawmakers on November 7, 2024 that he was open to suggestions should any portion of his plan become objectionable (see 0:42 – 1:00 segment of this video), we are hoping that his admonition to lawmakers also extends to everyday citizens. With that in mind, here is a video of our proposal to clear up the logjam presently existing in the Louisiana House as it pertains to HB-9:
11/16/24: Sound Off Louisiana’s proposal for potentially unblocking the logjam that has resulted for Louisiana House Members’ heartburn over “bitter pill” # 1 (i.e. HB-9).
So, the video above represents our suggestion. If anyone else would like to offer one, feel free to comment on this post or, if you’re willing, reach out to us to have a Sound Off Louisiana feature of your own offering an alternative suggestion.
Next week is critical in the ultimate outcome of Gov. Landry’s plan, and we’ll provide another comprehensive update once the ultimate fate of the package begins to come into clearer focus.
Landry should not take his foot off the gas; he should stomp it to the floor! States like Texas and Florida really appreciate the taxpayers of LA providing money to fix their bridges and repair their highways. Yes, you read that correctly. Millions of dollars from LA taxpayers are being funneled every year to support projects in other states and it is completely Louisiana’s fault.
What Landry should do is repeal the income tax entirely, expand HB-9 and make it revenue neutral for 5 years. The only exception might be items to mitigate a regressive sales tax.
Every state must fund state government. Spending in 2025 is projected to be roughly $51B. Some states, such as FL and TX are smarter in how they approach funding. Switching to a consumption/sales tax and making it revenue neutral for 5 years is a smarter way forward.
One reason is a quirk in the IRS tax regulations that lets taxpayers deduct state income tax or sales tax but NOT both. There is a caveat that you must be able to itemize, but theoretically if LA switched to a consumption tax, 100% of the amount residents spend to fund state government could be tax deductible at the federal level. The sales tax you pay on a new car, tax on a new big screen TV, even the tax on a new pair of shoes would be deductible (if you itemize) on your federal return.
For states like LA that fund government by both an income tax and sales tax, only the amount related to the income tax is deductible at federal level. Compare that to a state like TN or TX where the entire state government is funded by a sales tax. In those states, 100% of the cost to fund state government is deductible at the federal level. The result of using both an income and sales tax is Louisiana taxpayers pay millions more in federal income taxes, money the federal government uses to fund projects in other states, like FL and TX. It makes a lot more sense to keep the money in the pockets of Louisiana taxpayers.