Governor Jeff Landry has worked with the Louisiana Legislature to approve significant tax reforms designed to stimulate economic growth in the state. Key provisions of the new tax plan include a flat 3 percent income tax rate for individuals, a reduction in corporate income taxes, and a temporary rise in the state sales tax. The tax package passed with bipartisan support and is designed to align Louisiana’s tax system with neighboring states that have seen economic growth through similar reforms. The Legislature passed the package on Friday, following a special session that began on November 6, and they have been signed by Governor Landry.
The changes will take effect on January 1, 2025.
Corporate income tax rate reduced
The Legislature approved HB 10, which reduces the state’s corporate income tax rate significantly. The new flat corporate tax rate will be 5.5 percent, down from 7.5 percent, one of the highest rates in the nation. Furthermore, Louisiana will phase out the corporate franchise tax, a levy on property ownership and business operations, by January 1, 2026.
Sales tax increase and expansion to digital products
Lawmakers voted to temporarily raise the state’s sales tax rate to compensate for the income tax cuts, generating additional revenue to address the budget gap created by the tax reductions. HB 10 increases the state sales tax to 5 percent, up from 4.45 percent. This new rate will remain in place until 2030, when it will decrease to 4.75 percent. With the new structure, Louisiana will have the highest combined state and local sales tax rate in the nation at 10.6 percent. In addition, HB 8 expands the sales tax to include digital products like apps, streaming services, software, e-books, and digital music.
Transition to a flat personal income tax rate
HB 10 also simplifies the state’s personal income tax, shifting from a tiered system with a top rate of 4.25 percent to a single flat rate of 3 percent for all individuals.
In addition to these tax changes, the Legislature approved a bill to make permanent a $2,000 annual stipend for teachers, aimed at addressing the state’s teacher shortage. This funding will be partially supported by reallocating $2 billion from Louisiana’s Millennium Trust Fund to reduce debt in the teachers' retirement system.
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LEO VARNER
Principal, UHY Advisors
Leo Varner leverages more than 23 years of experience in state and local tax matters to lead UHY's National State and Local Tax practice. He assists clients from a broad range of industries and has a proven track record in navigating complex regulatory landscapes, providing strategic state tax solutions, and optimizing tax structures for clients. Leo specializes in tax controversy, helping clients to mitigate tax exposure and to recover tax overpayments.