Flat tax rates are popular in many states. Besides elimination of red tape, it makes it easier for the taxpayer. Louisiana is looking to modify their current income tax plan. What does that mean for the taxpayers in the Bayou state?
At a Glance
- Governor Landry plans a special legislative session in November to overhaul the tax system.
- The proposal includes gradually reducing income taxes, aiming for elimination by 2030.
- Sales tax will be expanded to more services, maintaining the current rate.
- The initiative addresses a $700 million budget shortfall.
Landry’s Tax Plan Details
Governor Jeff LandryLouisiana’s tax system issues are currently being experienced. The November session would include a proposal to eliminate personal income tax by 2030. A flat tax would be in place for those making over $12,500 a year. Anyone below that rate would be exempt. The plan is expected to be in place by 2030. This move is part of a broader Republican effort to enhance Louisiana’s economic competitiveness and address a looming budget shortfall.
The proposal suggests expanding the sales tax base to items and services such as lobbying, dog grooming, and car washes, without increasing the sales tax rate. Landry aims to repeal corporate income tax, eliminate taxes on prescription drugs and make certain business exemptions permanent, creating a more business-friendly climate.
Louisiana legislators want more information about Gov. Jeff Landry’s plan to overhaul the state’s tax system before they commit to a special legislative session in November to pass new tax laws. @JSODonoghue reports: https://t.co/vFqKV5obiZ #lalege
— Louisiana Illuminator (@IlluminatorLA) September 24, 2024
Addressing Budget Shortfalls and Competitive Pressures
Louisiana is currently facing a $700 million budget shortfall. Governor Landry’s planned tax reform is in answer to the issue created by sales taxes set to expire soon,.By staying competitive with other nearby states, the new plan would use a flat tax that works elsewhere. Past reforms have included reducing the franchise tax rate and abolishing the throwback rule, but structural changes are still necessary.
The Board of Regents’ advisory emphasized that Louisiana must adopt pro-growth tax reforms to attain better outcomes for its citizens and businesses. By adopting a single-rate tax system, Louisiana can simplify and bring transparency to its tax system, effectively offering an easier revenue forecast for the state.
Governor Jeff Landry has a big plan to reform Louisiana's taxes, but how will it impact you? Now, state lawmakers want answers. https://t.co/PiO5qxAidt
— KPLC (@KPLC7News) October 4, 2024
Conclusion and Implications
Some state lawmakers want the governor to state how the new plan is a benefit over the current system. Many feel that it looks at a non-existent problem.
Any amendments passed in the special session require voter approval in the March election. Previous multiple sessions were last held in 2018, incurring significant costs, indicating the gravity of this reform effort. By seeing the plan come to fruition,, the position of Louisiana in the State Business Tax Climate would increase.
