The fate of Gov. Jeff Landry’s complicated tax-swap package rests with the Louisiana Senate, which is set to take up the key elements of the plan on Thursday after days of backroom negotiations. The latest plan calls for raising Louisiana’s sales tax from 4.45% to 5%, and bringing the state’s overall sales tax rate to the highest in the nation. The extra sales tax would generate about $600 million annually, and would partially offset revenue lost from income and business tax cuts. Originally, Landry wanted to make up the revenue loss by expanding the sales tax base to dozens of services, but the House balked at the idea last week. The Times-Picayune | Baton Rouge Advocate’s Tyler Bridges reports:
If senators approve Landry’s proposals, he will need the House to follow suit, perhaps as early as late Thursday. The plan overall would reduce state taxes and give the biggest dollar savings to the wealthy and corporations, with Landry saying this will produce an investment boom. One possible sweetener under discussion Wednesday: limiting the sales tax increase to four years. Lawmakers must pass the entire package by 6 p.m. Monday, when the 20-day special session has to end. A key fact hovers over the latest developments at the state Capitol: Louisiana already has the country’s highest sales tax, and a tax that hits the poor the hardest.
The Louisiana Illuminator’s Julie O’Donoghue and Piper Hutchinson report on the heartburn that the proposed sales tax increase is creating in the House:
“As soon as you start to increase the sales tax more, the plan becomes more regressive,” said Rep. Matthew Willard, D-New Orleans, leader of the House Democratic Caucus. Several Republicans and Democrats in the House also weren’t enthusiastic about the sales tax portion of the original tax plan and might not want to vote for a 5% rate. A bill to keep the state sales tax at 4.4% barely passed the House, with just two votes to spare last week.
The Senate Revenue and Fiscal Affairs Committee approved hundreds of changes to Landry’s tax package on Tuesday, but many key issues remain unresolved as they hit the Senate floor on Thursday. Senators will vote on, among other things, legislation that would replace Louisiana’s graduated corporate income tax structure with a flat rate of 6% and keep tax credits for film, digital media and historic preservation projects, but at a capped amount.
DOGE Louisiana edition
Gov. Jeff Landry is pushing for a state “Fiscal Responsibility Program” that would probe for efficiency and savings in government and the possible elimination of services. Speculation swirled on social media that the governor’s move is intended to replicate a new federal initiative that was announced by President-elect Donald Trump. The Times-Picayune | Baton Rouge Advocate’s Alyse Pfeil reports:
The new program would “begin with first examining the current services state government is mandated to perform and probe for the most efficient, modern ways to provide those services,” Landry said in a letter to Senate President Cameron Henry, R-Metairie, and House Speaker Phillip DeVillier, R-Eunice. The program could then look into whether those state government services should still exist. It could also explore “what other services our government might perform to give the best possible service at the lowest, most reasonable cost,” the letter said. Landry said he would appoint a “Fiscal Responsibility Czar” who would work with eight members appointed by the House and Senate.
School letter grades improve amid looming overhaul
Louisiana schools improved their state ratings for the third straight year, earning a B average for their performance during the 2023-24 academic calendar. But as The Times-Picayune | Baton Rouge Advocate’s Patrick Wall explains, the scores come just five months after the state’s top school board approved major changes to the current grading system.
This year, nearly 75% of high schools earned As or Bs even though only about 40% of students met state expectations in Algebra or English I. Under the tougher rating system that the board approved, the number of schools earning top grades is expected to sharply decline. But that system won’t take effect until 2026, which puts state officials in the awkward position of touting this year’s grades while also arguing that schools must be held to a higher standard.
As Wall notes, there were performance gaps between different schools, districts and racial groups:
Nearly 18% of schools earned an overall grade of D or F this year, as did four school districts (another 17 districts earned C’s). In addition, big gaps separate different student groups. For example, White students statewide had an average score that was about 20 points higher than Black and Hispanic students, who are more likely to live in poverty and have fewer resources to enhance their education.
Rate cut could improve borrowing costs for government projects
The Federal Reserve’s move to cut interest rates by a quarter point earlier this month – the second consecutive cut – will lower borrowing costs for state and local governments looking to finance large, expensive projects. States Newsroom’s Casey Quinlan elaborates:
This change means states and localities will have lower borrowing costs, which will make it easier to make big long-term changes in infrastructure, to see higher sales tax collections as a result of more spending, and it is likely to result in better pension performance in an environment where stocks tend to respond to lower rates, fiscal policy experts at Pew say.
Number of the Day
$283 – Average amount that Louisiana residents spent on groceries per week during October 2023, which ranked 10th highest nationally. U.S. households spent around $270 a week during that same time. (Source: U.S. Census Bureau via The Times-Picayune | Baton Rouge Advocate)