Louisiana legislators passed a tax reform plan that has received overwhelming support in both the House and Senate, but voters will get the ultimate say on whether that plan succeeds. In light of this, it may be valuable to walk through what is included in these reforms and what effect the changes will have on taxpayers. Ultimately, the plan would simplify the state’s tax code, lessen residents’ tax burdens, and make the state more competitive.
One constitutional amendment on the ballot addresses the sales tax. If approved by voters, the amendment would centralize sales tax collections and administration at the state level. As Louisiana is one of only four states that lacks unified sales tax administration, this change would be an important step forward. Currently, sellers must remit tax to 64 taxing jurisdictions—a costly and burdensome task.
The other constitutional amendment would help pay for the rest of the plan: it would eliminate the state’s deduction for federal taxes paid in order to lower individual and corporate income tax rates, and would set a cap of 4.75 percent on individual income tax rates. However, it should be emphasized that the legislature’s plan includes a statutory top rate of 4.25 percent—well below the new cap.