The Senate Revenue and Fiscal Affairs Committee approved hundreds of changes to Gov. Jeff Landry’s tax and constitutional overhaul package on Tuesday, which heads to the Senate floor with many key issues still unresolved. The committee advanced proposals to replace the state’s graduated corporate income tax structure with a flat rate of 6%, which is lower than the 3.5% rate pushed by Landry, and voted to keep tax credits for film, digital media and historic preservation projects that the governor had proposed to scrap. Lawmakers did, however, impose spending caps on those subsidy programs. The Times-Picayune | Baton Rouge Advocate’s Tyler Bridges reports: 

The governor wanted to make prescription drugs no longer subject to local sales taxes, but committee members voted to keep that tax at the request of local governments who said losing it would cause them budget shortfalls. The committee advanced two other key portions of Landry’s original plan. House Bill 1 would replace the three-tier individual income system with a flat 3% rate and triple the standard deduction for individual filers. House Bill 3 would repeal the corporate franchise tax, which is a tax on corporate assets.

Still undecided is how lawmakers plan to pay for Landry’s tax-cutting binge. A plan to expand the state sales tax to include dozens of services is stalled in the House. The Senate is considering whether to raise Louisiana’s highest-in-the-nation sales tax from 4.45% to 5% – which would generate about $600 million per year and make the state’s tax structure even more regressive. But getting the two-thirds supermajority support for raising the sales tax could be a tough sell with legislators, as The Times-Picayune |Baton Rouge Advocate’s Alyse Pfeil reports:

But the plan to tax more consumer services is stagnating in the House and doesn’t currently have the support it needs to pass. (Rep. Daryl) Deshotel said he’s “vehemently against” increasing Louisiana’s sales tax rate as part of the overall tax package. “We’re already tied for the highest sales tax in the country, and if we would increase this, we would be the highest,” he said. “To double down on a tax that I know is bad for the people, I just can’t support that.”

Meanwhile, senators also are grappling with the local property tax on business inventory, which is a key source of revenue for some cities and parishes but could vanish if Landry gets his way. 

In some parishes, the business inventory tax generates more than $30 million a year. But in others, the tax brings in a meager $1 million or less. Landry’s Revenue Secretary, Richard Nelson, the tax plan’s principal architect, has said the inventory tax drives away potential business investment in Louisiana. But he also acknowledges eliminating it presents a difficult political problem given local government reliance on it.

The Times-Picayune | Baton Rouge Advocate’s Clancy DuBos explains why the Senate is once again the fulcrum of Landry’s big ideas. 


Taxpayer dollars flow to ‘segregation academies’

Private schools popped up across the South during the Civil Rights Era, as white policymakers and families looked for a way to skirt new desegregation laws. Now, ‘segregation academies’ are receiving millions of taxpayer dollars through rapidly expanding voucher programs. ProPublica’s Jennifer Berry Hawes and Mollie Simon explain how these efforts are perpetuating school segregation across the South: 

In North Carolina alone, we identified 39 of these likely “segregation academies” that are still operating and that have received voucher money. Of these, 20 schools reported student bodies that were at least 85% white in a 2021-22 federal survey of private schools, the most recent data available. Those 20 academies, all founded in the 1960s and 1970s, brought in more than $20 million from the state in the past three years alone. None reflected the demographics of their communities. Few even came close.

The amount of public money flowing to these voucher-style programs is set to increase in the coming years: 

Georgia, Alabama, Arkansas, Louisiana, Florida and South Carolina all have passed new or expanded programs since 2023. … Voucher critics contend these programs will continue to worsen school segregation by helping wealthier white kids attend private schools; supporters argue they help more Black families afford tuition. But many of the states have made it hard to discern if either is happening by failing to require that the most basic demographic data be shared with the public — or even gathered.

Louisiana lawmakers recently approved a contract with a vendor to run the state’s private-school voucher program. 

What Trump means for public finance

From the looming ‘Super Bowl’ of tax, to the possible elimination of the U.S. Department of Education, a second Trump presidency has the ability to create a seismic shift in federal spending. Governing’s Girard Miller breaks down the implications for public finance during the next four years: 

If there is a single theme that state and local policymakers should internalize now, it is the importance of fiscal self-reliance. Habitual lobbying in Congress for ever-growing federal intergovernmental largesse is likely to face stronger pushback in the coming regime than we have seen in decades. As I’ve suggested before, a logical corollary is the importance of properly funding state and local rainy-day budget stabilization funds in advance of the economy’s next cyclical recession on the assumption that there won’t be much help from Capitol Hill.

Financing entertainment venues with taxpayer dollars

The post-pandemic economy has seen consumers spend big money on entertainment, such as athletic events and concerts, which have become big revenue generators for cities and states. New Orleans, for example, saw a $500 million boost from Taylor Swift’s Eras Tour, more than half of what the city generates during Mardi Gras. Now, policymakers around the country are considering generous tax incentives to finance the construction of new entertainment venues. Pew’s Page Forrest explains what should be considered before taxpayer dollars are used on these projects: 

The recent shift in spending habits and renewed focus on experiences following the height of the pandemic will likely continue to drive city economies, which in turn are often major hubs of tax revenue for states. Cities can no longer bank on the five-day work week to boost foot traffic, so it makes sense that they’re investing in facilities they know will bring crowds. However, without a strong evaluation system or substantial private buy-in, state officials and residents might feel like taxpayer dollars are just being thrown at a very, very lucrative form of entertainment—no matter how eager they are to get out of the house.

LSU said its decision to allow a private developer to finance, build and own a new on-campus arena meant no public dollars would be used during the process to replace the aging Pete Maravich Assembly Center. But a recently created economic development district that is located on and around the university’s campus can create new taxes, without voter approval, and spend the revenue on projects within its boundaries, such as a new arena.


Number of the Day

1 – Louisiana’s national rank for combined state and average local sales tax rates. The state’s tax system is already regressive, as people with low incomes pay a higher percentage of their income in state and local taxes than the highest earners. This is in part because Louisiana relies heavily on sales and excise taxes to raise revenue. Any further increase to the state sales taxes will make Gov. Jeff Landry’s tax package more regressive. (Source: Tax Foundation)