(By Nolan Mckendry/The Center Square) — The Louisiana Legislature began the tedious and painstaking process on Wednesday of considering the monumental tax reforms proposed by Gov. Jeff Landry in a special session.
Included in the bills is a flat income tax rate, an expansion of the taxed goods and services, the inclusion of digital goods for sales taxes, the repeal of the corporate franchise tax and a reduction of the corporate income tax rate.
At least three of the bills will require a vote from the people of Louisiana and are tied to the amendment of article seven of Louisiana’s constitution.
“This tax code is bloated, broken and incredibly out of date, and is holding our state back,” Landry said in his speech addressing the Legislature, adding that the tax code allows the intrusion of special interests, favoritism.
While the motivation for reform includes lowering the tax burden on Louisiana citizens and businesses, the Landry administration also hopes to address the “disease” of fiscal cliffs the state is prone to.
Currently, the state offers hundreds of tax programs which allow various businesses, industries and individuals to be exempt from payment, often leaving Louisiana in a tough spot come time to balance the budget.
Following the economic downturn of the early 2010s and a fall in oil prices, Louisiana faced a massive budget shortfall under then-Gov. John Bel Edwards, with a nearly $1 billion deficit by 2016, leading to a 1% sales tax hike. That hike was set to expire in 2018, but the Legislature voted to partially retain the tax.
For decades, state revenues were largely generated by the oil and gas industries. But falling prices in the wake of global trade and the US shale boom have made it impossible to rely on Louisiana’s preeminent industry. Currently, gas and oil generates only 5% of the state’s budget.
“We repeatedly hit these fiscal cliffs, with every decline in the price of oil,” Landry said. “The actions of countries like Russia, Venezuela, Iran and other Middle East countries that hate America have an outsized impact on the funding of our schools, our colleges and the healthcare of our people.”
Each bill has been sent to committees to be further considered and combed through in detail.
Not every lawmaker appeared as enthusiastic as Landry did during his speech.
“Legislators are privately expressing apprehension at the task to completely rewrite Louisiana’s tax system during a special session over the next 19 days,” the Louisiana Democratic party said on X.
“This is not a time to rush through. We need to be deliberate and take our time,” said Democratic Minority Leader and Rep. Matthew Willard, D-New Orleans.