TAX SPECIAL SESSION HITS THE GROUND RUNNING
The 2024 Third Extraordinary Session convened Wednesday, November 6, opening with Governor Jeff Landry issuing a call to action on his tax reform plan, Louisiana Forward. House members immediately got to work, with the Ways and Means and Appropriations committees holding a series of hearings on key components of the Governor’s tax plan. Several measures moved forward and are expected to be considered by the full House this week.
Read on for a recap of week one and a look ahead at week two.
Louisiana Forward
Last month, Governor Landry announced his Administration’s tax reform proposal, Louisiana Forward, a full-scale restructure of Louisiana’s tax code, to include revisions to Article VII of the State Constitution. The Governor stated that the special session to consider the plan presents an opportunity to “make Louisiana a place where people want to raise a family and create jobs.”
Hallmarks of Louisiana Forward, as outlined by the Louisiana Department of Revenue (LDR), include:
- Eliminating uncompetitive taxes, such as the franchise and inventory taxes
- Broadening tax bases by eliminating preferences and reducing rates
- Simplifying the tax code with fewer carve-outs and flat income tax rates
- Giving the legislature greater spending flexibility by removing dedications and unlocking funds
- Accelerating debt payments to free up recurring general fund revenue
More details on the plan are available on the LDR’s tax reform dashboard here.
Governor Landry opened the special session with remarks on the need to enact his tax proposal. Review a few highlights below:
On Louisiana’s outdated tax code:
“…Our tax code has not seen significant change since 1974. In the 50 years since, the world around us has changed greatly – but this book has remained the same. This tax code is bloated. This tax code is broken. This tax code is incredibly out-of-date, and this tax code is holding back our state.”
On competitiveness:
“Look at North Carolina, once lagging – as we are today. In one short decade since modernizing their tax structure – North Carolina is now growing at a record pace and is ranked as one of the best places in America to do business… Every one of our Southern neighbors has adapted, or is adapting for growth and success, and they are winning because of it. Louisiana must change or sadly other states will continue to rob us of our children and grandchildren. And the extraordinary talent they possess.…”
On Louisiana Forward:
“…I implore you to look at this plan carefully, but also collectively. There is not just one bill in this session that will turn this state around. The ENTIRE package fixes what’s wrong and is required of us. This debate has lingered over our state like a dark cloud for generations. The time for tweaking, arguing, or making perfect the enemy of good has long passed…These next two weeks can mark a historical turning point that will be recognized as a milestone in the rebirth of Louisiana.”
Read Governor Landry’s full address here.
Tax Measures on the Move
House Ways and Means and House Appropriations held multiple hearings last week to begin considering measures included in the Governor’s tax plan. Committee members heard some bills over the course of multiple hearings in order to allow additional time for questions and public testimony.
Below are key tax measures that moved in week one:
- HB 1 by Rep. Emerson (Personal Income Tax) – Provides for a flat rate of 3.0% for purposes of calculating income tax for individuals, estates, and trusts, increases the standard deduction, and modifies or repeals certain income tax deductions and credits
HB 1 was reported favorably by House Ways and Means on 11/7, then reported favorably by House Appropriations on 11/8, and is now pending the full House.
- HB 2 by Rep. Emerson (Corporate Income Tax) – Provides for a flat rate, of 5.5% for the 2025 tax year, and 3.5% for tax years thereafter, for purposes of calculating corporate income tax and terminates certain corporate income tax exemptions, deductions, and credits
HB 2 was reported favorably by House Ways and Means on 11/10 and is now pending House Appropriations.
- HB 3 by Rep. Emerson (Corporate Franchise Tax) – Repeals the corporation franchise tax and limits eligibility of certain credits to be claimed against the corporation franchise tax
HB 3 was reported favorably as amended by House Ways and Means, on 11/7 and is now pending the full House.
- HB 7 by Rep. Emerson (Constitutional Amendment) – Revises Article VII of the Louisiana Constitution
HB 7 was reported favorably as amended by House Ways and Means on 11/8 and is now pending House Appropriations.
- HB 11 by Rep. Deshotel (Ad Valorem Tax) – Provides for the homestead exemption, special assessment level, and other property tax exemptions for purposes of determining ad valorem taxation of certain property; includes a mechanism providing parishes the option to eliminate the inventory tax through a one-time incentive payment from the state
HB 11 was reported favorably as amended by House Ways and Means on 11/10.
Louisiana Economic Development (LED)
In the Ways and Means Committee, several questions were raised about the future of Louisiana’s economic development toolkit, as one component of the Louisiana Forward plan proposes sunsetting the current slate of LED tax incentive programs from state statute. LED Secretary Susan Bourgeois explained that the next phase of Louisiana Forward involves LED drafting legislation to restructure the state’s economic development toolkit around three key programs:
- Site development fund
- Strategic investment fund
- High-impact, high-wage job creation program
LED will draft legislation to restructure their incentives in preparation for the 2025 Regular Session. The newly formed Louisiana Economic Development Partnership (LEDP), comprised of private sector leaders representing key industries across the state, is tasked with development of a strategic plan for LED. The strategic plan, expected in February 2025, will help to inform the details of LED’s new incentive structure.
LOOKING AHEAD
House members are expected to consider various components of the tax plan on the House floor in week two. Committees will also continue hearings on other bills in the Governor’s tax plan, including HB 8 by Rep. Brass, which would levy sales and use taxes on certain digital products and services. House Education will also consider HB 5 by Rep. Bacala, a measure that would require school systems to provide salary increases for teachers and other school employees using savings generated by the state’s payment of certain unfunded accrued liability.
Be on the lookout for 1A legislative updates throughout the special session.
