Is Tax Reform Coming to Louisiana?

March 29, 2017

Today, Governor John Bel Edwards of Louisiana (D) released initial details of his tax reform plan. Several components come from recommendations made by a tax task force, whose report was issued earlier this year, and our reform book on Louisiana, Louisiana Fiscal Reform, A Framework for the Future. The plan is wide-reaching, with changes to all the major tax types in Louisiana.

The plan is summarized below.

  • Individual Income Taxes: The plan would lower the current individual income tax rates from 2, 4, and 6 percent to 1, 3, and 5 percent. It would also repeal the deduction for federal taxes paid.
  • Corporate Income Taxes: The plan would consolidate the state’s five income tax brackets of 4, 5, 6, 7, and 8 percent into three brackets of 3, 5, and 7 percent. The deduction for federal taxes paid would also be eliminated for corporations in the state.
  • Sales tax: The 1-cent sales tax increase passed in 2016 would expire as slated at the end of the 2018 fiscal year. The state would also expand its sales tax base to include a number of services, mirroring the tax base of neighboring Texas. The state would also unify the sales tax bases of the remaining 4-cent state-level sales tax.
  • Gross Receipts Tax: Governor Edwards proposes to create a new gross receipts tax in Louisiana. The tax, set at 0.35 percent of receipts above $1.5 million, would serve as a minimum tax to the corporate income tax. Firms would pay the higher of the two liabilities. The governor suggested during his news conference that additional modifications would be made for some low-margin firms, but those details are yet unavailable.
  • Franchise Tax: The state’s franchise tax would phase out over the next 10 years.

We will provide more commentary regarding Governor Edwards’s proposals over the coming days and weeks as details are released. The Louisiana legislative session begins on April 10, 2017.

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