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The Louisiana Legislature approved permanent income tax cuts for individuals and corporations, and eliminated the corporate franchise tax during a fast-moving special session that concluded on Friday. To make up part of the revenue loss from the tax cuts, lawmakers agreed to a temporary increase in the state’s sales tax that makes Louisiana’s overall sales-tax rate the highest in the country. The Times-Picayune | Baton Rouge Advocate’s Tyler Bridges recaps:
Landry achieved his prize goal of getting legislators to scuttle the graduated individual income tax system — which has a current top rate of 4.25% — for a single 3% rate as of Jan. 1. In conjunction, Louisiana will nearly triple the standard deduction for individual filers to $12,500 at the beginning of 2026. To pay for the tax cuts, legislators had to swallow increasing the state sales tax to 5%, or 1% higher than if they had allowed a temporary sales tax to expire next year. The higher sales tax will last for five years and then drop to 4.75%. Landry had sought to renew the expiring sales tax at just under a half-cent. Louisiana already had the country’s highest sales tax rate, and now a tax that hits the poor hardest will be even higher.
Next up: Voters will get an opportunity to weigh in on a complicated amendment to the state constitution that passed as part of the package:
The proposed amendment would also give parishes the option of repealing the property tax on business inventory, take most property tax exemptions out of the constitution and put their fate in the hands of legislators, impose a cap on annual spending and make it harder to create more tax breaks in the future. The proposed constitutional amendment also would merge two state savings accounts, and, if passed, allow Landry to use some of that money to pay parishes to drop the inventory tax program. It also would double the standard deduction for seniors on their income taxes.
The changes approved by the Legislature will cement a regressive state tax structure where Louisianans with low and moderate incomes pay a higher rate of tax than the wealthy. Neva Butkus, of the Institute on Taxation and Economic Policy, explains:
This tax swap would result in the lowest-income 20% of Louisianans (with incomes under $22,100 a year) receiving a small tax increase due to the state’s additional reliance on deeply regressive sales taxes. Middle-income households making $55,900 on average would receive an average cut of $87. Meanwhile, the wealthiest 1% of Louisiana households with average annual incomes of $1.8 million would receive an average tax cut of nearly $15,400 – more than a full-time minimum wage worker would make in a year in Louisiana.
Click here to read Invest in Louisiana’s statement on the tax special session.
Sending more children to adult prisons
While the special session was focused on tax policy, the Legislature also approved a constitutional amendment that would make it easier to send children to adult jails. Current law already allows prosecutors to charge juvenile offenders as adults for certain violent crimes, but Senate Bill 2 would expand that discretion to any felonies. State voters will decide whether to enact the new policy on their March 29 ballot. The Louisiana Illuminator’s Julie O’Donoghue reports:
Republican Gov. Jeff Landry backed the proposal and sat in the Louisiana House of Representatives as legislators debated and voted for the bill Friday. Still, it barely made it through the legislative process. The proposal only received 70 votes in the House, the exact number it needed to advance to voters. Ahead of the narrow victory, Republican leaders appeared anxious to get through the House vote quickly and moved to cut off debate and questioning early.
The Times Picayune | Baton Rouge Advocate columnist Will Sutton writes that the amendment puts too much power in legislators’ hands:
Imagine the Legislature deciding that a 14-year-old should be tried as an adult because he stole from a store or got into a fight at school. SB2 proponents say some children can’t be rehabilitated. Sigh. Fortunately, voters will get to decide whether such scared-straight tactics make sense — or will actually attract more businesses to Louisiana. Do SB2’s sponsors really think businesses will come here because we incarcerate more youth? Shouldn’t we instead promote early childhood education and care, healthy living and higher literacy rates?
Time short to fix Social Security “windfall” provision
The Social Security Fairness Act, which would eliminate federal provisions that reduce benefits for teachers, firefighters, police officers and other public employees who later moved to the private sector, advanced out of the U.S. House earlier this month. But as The Times-Picayune | Baton Rouge Advocate’s Mark Ballard explains, time is running out for the Senate to take up the legislation:
The Senate must vote on the legislation during the 12 days they work in December. And the lame-duck 118th Congress still has a full rack of tasks, including approving $98 billion in disaster relief, considering a must-pass defense bill and funding government to avoid a shutdown of many federal agencies. “They have a lot on their plate now. We’re keeping our fingers crossed,” said Hernandez — who noted she’s also mobilizing people to contact senators.
Approximately 90,000 former public-sector workers in Louisiana would be eligible to collect more Social Security benefits under the legislation, which is co-sponsored by U.S. Rep. Garret Graves of Baton Rouge and Abigail Spanberger of Virginia.
State to pursue Medicaid work requirements under Trump
A total of 22 states requested permission to enact work requirements for Medicaid recipients during the first Trump presidency, although only 13 were able to implement the change before President Biden assumed power. But states looking to enact these changes will have key support from a looming Republican trifecta in Congress. States Newsroom’s Shalina Chatlani reports:
Republicans on Capitol Hill are eager to find ways to pay for extending tax cuts enacted during Trump’s first term in office, and Medicaid — funded jointly by the federal government and the states — is in their sights. Requiring states to establish Medicaid work rules, as many Republicans would like to do, would cut federal spending by an estimated $109 billion over a decade, according to the Congressional Budget Office. That’s because the cost for about 900,000 people would shift entirely to states, while another 600,000 people would become uninsured, CBO estimated. About 72.4 million people are enrolled in Medicaid.
As Arkansas’ experience with Medicaid work requirements shows, these policies are are burdensome, unnecessary and ineffective:
In a 2020 study examining how the Arkansas work requirements played out, researchers from the Harvard T.H. Chan School of Public Health “found no evidence that the policy succeeded in its stated goal of promoting work and instead found substantial evidence of harm to health care coverage and access.” More than 95% of the Arkansas beneficiaries the researchers surveyed already met the work requirement or should have qualified for an exemption. The main reason people lost coverage, the researchers found, was because they had trouble verifying that they were complying with the rules. Many of those who lost their coverage stopped taking their medications, delayed care and fell into medical debt.
Number of the Day
$500 million – Estimated economic boost that New Orleans experienced from Taylor Swift’s Eras tour. For comparison, the Crescent City brings in about $900 million during Mardi Gras. (Source: Pew)