Louisiana lawmakers adjust business flat income tax rate; sales tax questions linger • Louisiana Illuminator

The extensive Senate committee changes to the Landry tax package offer no real insight on whether lawmakers are closer to finding middle ground with the administration. Their original proposal, in essence, balanced a reduction in income tax revenue with expanded sales taxes.

But the House of Representatives adjourned Tuesday afternoon without considering the only proposal currently on its calendar, House Bill 9, that would expand the state sales tax to nearly 20 new items and services. It remains to be seen whether this piece of the revenue puzzle is vital to the core of Landry-backed bills the Senate Revenue and Fiscal Affairs Committee advanced.

They include House Bill 1, which sets a flat income tax for individuals at 3%. House Bill 2 was updated to increase the flat income tax rate for businesses from 5.5% to 6%. Proponents of the change say it’s still a competitive rate when compared to other southern states’ corporate taxes.

The author of both proposals, Rep. Julie Emerson, R-Carencro, wanted the flat tax rates to drop further when state tax revenue reached certain benchmarks, but the Senate committee removed “triggers” from both of her bills that would have allowed that to happen. After Tuesday’s committee amendments, the Legislature would have to approve any future flat income tax rate reductions. 

The committee’s restoration of motion picture tax credits came after film industry representatives flooded Capitol corridors Sunday afternoon to stress the importance of the incentive to lawmakers. Lawmakers had previously said they would look for ways to preserve the enticement. Adjustments made Tuesday lower the annual cap on credits from $150 million to $125 million. 

The committee also scrapped a proposal that would have prohibited local governments from taxing prescription drugs, a concession to elements of the governor’s plan that could reduce parish and city tax collections, especially if the list of items to which the sales tax can be applied isn’t expanded.

Members also backed giving parish councils, school boards and sheriffs the power to lower business inventory taxes on their own, as long as they all are in agreement. Rep. Daryl Deshotel, R-Marksville, said the change to House Bill 11 would allow parishes to be more competitive with their neighbors should they decide to forego the same tax. 

Deshotel also updated his proposal to keep the homestead exemption in the Louisiana Constitution. That means any changes to the property tax break from primary residences would need approval from voters statewide. When the House of Representatives approved the bill, it would have moved the homestead exemption into state code, where only a two-thirds vote of the Legislature could have altered the tax break, and voters would have had no say in the matter.

Leaving the homestead exemption untouched and dropping the personal flat income tax rate might indicate lawmakers and the governor are doing what it takes to make his plan more palatable to voters. They get the final say in the form of a constitutional amendment ballot measure next year.

Another enticement they’ve offered is a permanent teacher pay raise, made possible through paying off teacher retirement system debt.   

Hanging over the special session is a state budget shortfall that could reach $700 million next fiscal year. Exactly how much lawmakers can fill that gap is hard to peg with so many pieces of legislation in still in flux.

Both chambers will convene again Wednesday morning, facing a 6 p.m. Monday final adjournment deadline. All changes made to House bills in the Senate will have to be agreed upon before then.

This report was updated at 7:50 p.m.