How Jeff Landry’s tax plan affects your pockets

Governor Jeff Landry enacted the beginning of his anticipated tax legislation with a statewide income tax cut accompanied by a higher state sales tax. His tax plan comes as a response to the rapid outward migration of Louisiana residents, as well as a mechanism of generating competition with other states. 

  On Dec. 4, 2024, Landry signed legislation that cut the personal income tax of Louisiana residents to a flat rate of 3% and the corporate income tax rate to 5.5%. This replaces the former tax policy, in which personal income was taxed in a tier-system from 1.85-4.25% and corporate income was taxed from 3.5-7.5%. 

Because those who originally were paying 1.85% would now be expected to pay more, the tax legislation has increased the standard tax deduction triply. The implication of this is that, for many lower-income households, income tax will be practically nonexistent. 

In order to make up for the revenue shortfall, the state sales tax will go up from 4.45% to 5%, along with other miscellaneous measures. This places Louisiana as having the most expensive sales tax in the United States. Therefore, Louisiana residents will feel this tax policy at the register. 

Critics of the legislation expressed their concerns by replacing a progressive tax with two different forms of regressive taxes (a higher sales tax and a flat rate income tax). While it is true that these are both regressive taxes, an overall independent analysis of the combined impact of the policies demonstrates that the tax plan will ultimately be marginally progressive.  

  In a speech given on Dec. 5, 2024, Landry commented, “For far too long, parents have watched kids leave this state for better opportunities.”  

  According to Presley Bo Tyler, a writer at the Shreveport Times, Louisiana is losing population at a rapid rate. The most pressing burden on Louisiana residents is lack of job opportunities, and secondarily the life expectancy is low. High income tax is not the main concern of those who choose to leave the state. 

  However, an analysis of the whole income plan seems optimistic about the way that Louisiana residents will be affected.  

  The replacement of the income tax rate with a higher sales tax appears to have the most devastating impact on the poor. However, these regressive policies counterintuitively lead to a more progressive tax system. 

An independent analysis done on Landry’s tax policy by the organization RESET Louisiana’s Future examines the overall tax liability that Louisiana residents will face. They find, “When looking at the combined impact of the changes to the individual income tax and the state sales tax, most resident households are likely to see a reduction in their overall tax liability.” 

  Based on common spending patterns, RESET found that lower income households will spend 29% more, or $96 a year, compared to higher income households who will spend 36% more at $826 per year. This creates a more progressive tax program as higher income households will be spending at a higher rate than lower income households. 

  Because Louisiana residents will have more take-home pay, the possibility of business growth opens job opportunities which could lead to the very impact for which Landry aims. 

Landry also pushed for four constitutional amendments to be added to the Louisiana constitution last month. Of these was one that aimed to further alter the tax system in Louisiana, but all four of the amendments were shut down by voters.

As tax season approaches, Louisiana residents will find themselves encountering this plan more intimately. When filing their taxes, they should be aware of the changes and file accordingly. 

While some residents are certainly educated on the new tax plan, some are not, especially those who are still filed as dependents. Eli Brunet, a junior moving image arts major, was transparent about his lack of knowledge surrounding the issue.

Brunet said, “I know literally nothing about it,” in regard to the new tax plan. After elaborating on the functions of the plan, he continued by stating that he is still filed as a dependent and thus has no taxes to file. He also said, “I’ll be so real. I’m like the worst person to ask,” on how he felt the plan would impact Louisiana residents.

Whether or not taxpayers are aware of the changes to their tax system, they will be affected by it in some way. They may be expected to pay more or less and their tax returns may look different to what they did before.