In November 2024, Governor Jeff Landry initiated a special legislative session to enact comprehensive tax reforms in Louisiana, aiming to simplify the tax code, reduce income tax rates, and enhance the state’s economic competitiveness. Key components of the reform include:

• Individual Income Tax: The state transitioned to a flat income tax rate of 3%, replacing the previous graduated system where rates reached up to 4.25%. Additionally, the standard deduction nearly tripled from $4,500 to $12,500, and the annual retirement income exemption for seniors increased from $6,000 to $12,000.

• Corporate Taxes: The corporate income tax rate was standardized at 5.5%, down from a maximum of 7.5%. Furthermore, the corporate franchise tax is set for repeal, effective January 1, 2026.

• Sales Tax Adjustments: To offset revenue reductions from income tax cuts, the state sales tax rate will increase from 4.45% to 5% starting in 2025, with a planned reduction to 4.75% after December 31, 2029. The tax base has also expanded to include digital products and certain services, such as prewritten computer software access and information services.

• Teacher Pay Raise: The reforms propose a constitutional amendment to provide a permanent $2,000 annual salary increase for teachers, subject to voter approval in March 2025.

Governor Landry emphasized that these reforms are designed to make Louisiana more competitive, stimulate economic growth, and ensure that residents retain more of their earnings. The legislative package reflects a significant shift in the state’s fiscal policy, aiming to modernize the tax system and promote long-term fiscal stability.