BATON ROUGE, La. (AP) — Louisiana lawmakers hit the brakes on Thursday, delaying a vote on a major bill within Governor Jeff Landry's expansive tax reform framework. This reform package promises significant overhauls, including around $2 billion targeted at cuts to both individual and corporate taxes. Most of these bills have progressed without major hitches through the state’s House of Representatives during its third special legislative session this year. But the proposed sales tax expansion covering various services—think lawn mowing, tattooing, and even using coin-operated laundries—has sparked considerable pushback among lawmakers.
Tabling this bill raises questions about the level of support Landry and his team have secured. To gain passage, the GOP-majority House needs backing from 70 of its 105 members. "I think the bill is on life support if it isn’t dead already," remarked Republican Representative Joe Stagni, expressing the concerns swirling around the proposed legislation.
Exiting the House chamber after the postponement, Landry sought to calm fears, asserting there weren't insufficient votes for the bill's passage. “Don’t ever go in the kitchen halfway through the meal being cooked, judge it once it’s cooked,” he stated, indicating confidence about the eventual outcome. Representative Julie Emerson, a key player behind several tax reform bills, hinted at divisions among her colleagues—some outright oppose the entire bill, whereas others have issues with specific taxes within it.
Lobbyists have taken to the trenches as well, battling against the proposed taxes impacting services like property repairs and maintenance. They argue such taxes would place undue burdens on small businesses, inevitably raising prices and insurance rates for consumers.
On the flip side, lawmakers managed to pass a separate measure, solidifying a temporary 0.40% sales tax increase as permanent, albeit with slight reductions recalibrated to lower the state’s overall sales tax rate to 4.40%. This sales tax expansion is touted to potentially generate approximately $820 million annually, which many see as beneficial for the state's financial ecosystem.
Supporters of the tax measures, including Republican Representative Mark Wright, argue, "With a sales tax, a person has a choice. With an income tax, there is no choice.”
This debate is particularly poignant, considering Louisiana’s tax system is often noted as one of the most regressive nationally; lower-income families inadvertently end up shelling out higher percentages of their income compared to wealthier households. Research from the left-leaning Institute on Taxation and Economic Policy confirms this trend, with recent studies highlighting the proposed reforms would only modestly make the existing structure more progressive without accounting for expected increases at local sales tax levels.
Landry's vision for the tax reforms is modeled after success stories from states like North Carolina and Texas, which he believes are setting the benchmark for economic competitiveness. He claims these reforms will make Louisiana more appealing to businesses poised to create jobs within the state. Notably, the Tax Foundation, which often analyzes tax competitiveness, currently has Louisiana ranked 40th.
Yet, resistance persists, as some lawmakers question the practicality and enforceability of the far-reaching sales taxes on so many services. Republican Representative R. Dewith Carrier, representing multiple parishes from southwest Louisiana, pointed out potential compliance issues, stating, "Don’t count on my district to do it, them boys they take cash, they’ll trade it for a fifth ... of vodka or food stamps.”
On Wednesday, bolstering their reform ambitions, the House approved reducing the corporate income tax rate significantly—from 7.5% down to 3.5%—and another measure targeting new taxes on digital goods and services like streaming websites, which is projected to contribute another $40 million. Additional bills have proposed the elimination of Louisiana’s 0.275% corporate franchise tax—worth over $500 million annually—and have aimed to simplify the individual income tax to just 3%, which would cost the state around $1.3 billion.
What's next? The House is slated to revisit the previously tabled proposal concerning the sales tax extension on services this coming Monday.
Brook is part of The Associated Press/Report for America Statehouse News Initiative—dedicated to shining light on underexposed issues through local journalism.
