Better Louisiana’s collaboration with PAR, called RESET Louisiana, hired economist and fiscal expert Greg Albrecht in fall 2024 to conduct an independent analysis of the tax reform plan proposed by Gov. Jeff Landry’s administration, which was debated during a November special session. In Summer 2025, RESET reengaged Albrecht to update his analysis based on the final law changes, after the constitutional amendment elements were considered and rejected by voters.
The report’s primary intent was to provide an outside review of the plan to determine the impact of the proposed income and sales tax changes on Louisiana citizens across a wide spectrum of income levels. That plan was debated during the special session, and the Legislature ultimately passed a revised version that included notable changes:
- The original plan to greatly expand the sales tax base to a wide array of services not currently taxed was rejected, though an expansion to include some digital services was included in the final legislation.
- Final law set a new 3% flat income tax rate for taxpayers at all income levels effective as of Jan. 1, 2025, replacing the tiered tax rate structure that was previously in place. Overall, this resulted in a lower marginal tax rate for the middle and top tiers of taxpayers.
- Although not studied in this RESET report, we note that the final law made substantial changes to business tax policy. The state lowered the state corporate income tax rate to 5.5%, adopted full expensing of all investments in machinery and equipment, and repeal of the state’s corporate franchise Tax.
- To make up for the significant loss of revenue caused by those changes, lawmakers agreed to increase the 4.45% general sales tax then in place to 5% beginning Jan. 1, 2025, and ending in 2030.
- They also levied an additional 5% tax on top of the general sales tax on certain telecommunications services, effectively bringing the rate on those services to 10%.
- While the original income tax proposal was mostly unchanged, lawmakers approved increases in the standard deduction and retirement deduction as originally proposed and added an inflation adjustment to the increase these deductions based on the Consumer Price Index.
- Final law more than doubled the standard deduction for all taxpayers, which effectively eliminates the tax for the bottom tier of taxpayers who were previously taxed at a rate of 1.85%.
- Doubled the deduction for retirement income from $6,000 to $12,000 for those 65 or older, reducing taxable income for these taxpayers.
The latest RESET report updates the first report to look at the income tax, followed by the sales tax and then analyzes what the combined tax changes could mean for households across a wide range of income brackets. The updated study shows that, under the new Louisiana tax system, most Louisiana households are likely to see a reduction in their overall tax liability. Further, while the new tax structure is slightly less progressive than the prior tax system, it remains modestly progressive overall. The highlights of the study along with the full report which are available on the RESET Louisiana website.
The Tax Foundation’s summary of the 2024 tax reform changes is online here.