Jeff Landry by Gage Skidmore is licensed under CC BY-SA 2.0
Americans for Tax Reform commends Governor Jeff Landry (R-LA), Revenue Commissioner Richard Nelson, and Republican leaders in the Louisiana House and Senate for their bold leadership in reaching an agreement on state income tax reform. This significant legislation simplifies the tax code, strengthens Louisiana’s economic competitiveness, and ensures hardworking Louisianans can keep more of their money.
The centerpiece of the deal is the move towards a 3% flat individual income tax rate, delivering a substantial income tax cut of $1.3 billion.
This reform replaces Louisiana’s current three-bracket system, which imposes a top rate of 4.25% on income over $50,000, with a simplified flat 3% rate for all taxpayers. Additionally, it includes a significantly higher standard deduction, guaranteeing that no individual will pay higher taxes with the move to a single bracket.
Income taxes by nature reduce incentives to work, save, and invest, and progressive income tax systems, such as the one Louisiana currently has, are even more egregious since you lose more of your earned income as you make more money.
The reform package also overhauls Louisiana’s corporate income tax system, transitioning from a graduated structure with rates ranging from 3.5% to 7% to a simplified flat rate of 5.5%. Before these reforms, Louisiana faced the highest corporate income tax in the South, hindering its economic competitiveness with neighboring states. By lowering and simplifying the tax system, the state is better positioned to thrive in a region characterized by strong growth and opportunity.
Lawmakers also repealed the 0.275% corporate franchise tax, a tax on businesses operating in the state worth more than $500 million. This tax was nothing more than an additional cost to businesses, stifling economic growth and pushing costs onto consumers.
One of the most significant provisions of the package is the proposed constitutional amendment to Article 7 of the Louisiana Constitution. The amendment removes unnecessary constitutional protections for tax exemptions, giving Republican lawmakers greater flexibility to eliminate these exemptions in favor of lowering or even abolishing the state income tax. Additionally, it introduces “growth limits,” which restrict government spending based on calculated economic growth rates within the state, thereby promoting responsible budgeting. The amendment will go before voters in March 2025.
For Louisiana to achieve the same economic growth seen in other southern states, comprehensive tax reform was a crucial first step. States with low- or no-income taxes are far more appealing for families, businesses, and entrepreneurs, creating an environment that fosters job creation, higher wages, and expanded opportunities. Most importantly, these policies empower hardworking Louisianans to keep more of their own money. Thanks to the leadership of Governor Jeff Landry, Louisiana is now on a promising path toward greater prosperity.