Louisiana voters to decide on major tax code changes in March election

Yahoo

24-02-2025

BATON ROUGE, La. (Louisiana First) — Pending a lawsuit, Louisiana voters will vote on a large swath of tax code changes under one constitutional amendment. The 115-page bill encompasses the closure of some funds, merging the state's emergency money, and paying down teacher retirement debt.
There are four constitutional amendments on the March 29 ballot. Amendment 2 contains tax code changes and reads as follows:
'Do you support an amendment to revise Article VII of the Constitution of Louisiana including revisions to lower the maximum rate of income tax, increase income tax deductions for citizens over sixty-five, provide for a government growth limit, modify operation of certain constitutional funds, provide for property tax exemptions retaining the homestead exemption and exemption for religious organizations, provide a permanent teacher salary increase by requiring a surplus payment to teacher retirement debt, and make other modifications? (Amends Article VII, Sections 1 through 28; Adds Article VII, Sections 29 through 42).'
The PAR Louisiana Constitutional Amendment Guide lays out the key points all wrapped up in this one amendment:
• Require a two-thirds vote for lawmakers to enact new tax break programs and mandate that enactment of any new sales tax exclusions and exemptions apply to both state and local sales tax.
• Double the standard individual income tax deduction for anyone 65 and older and lower the cap on the overall individual income tax rate that can be charged.
• Remove the cap that limits how much in severance tax revenue local governments can receive from the state for oil, gas and other mineral activity on their lands.
• Enact new limits on annual growth in state general fund spending on ongoing programs and services, with the limit tied to state population changes and inflationary factors. Lawmakers could spend money above the limit but only on one-time items that don't grow ongoing expenses.
• Merge two state trust funds, the Budget Stabilization Fund (commonly known as the state's rainy day fund) and the Revenue Stabilization Trust Fund. The Budget Stabilization Fund would grow larger and reach its cap so no new deposits likely would be added for several years. The Revenue Stabilization Trust Fund would eventually disappear. New dollars that otherwise would have flowed into the Revenue Stabilization Trust Fund instead would be available to lawmakers for immediate spending, with few restrictions.
• Use nearly $2 billion stored in education trust funds to pay down retirement debt for employees of K-12 public school systems and public colleges, eliminate the funds and require public school systems to use their retirement payment savings to provide up to a $2,000 permanent teacher pay raise and $1,000 school support worker pay raise. Teachers and support workers have been receiving those payments as one-time stipends that weren't guaranteed to reappear year after year.
• Remove several trust funds from the constitution and enact them instead in state law, where lawmakers would have more flexibility to change their rules and use in the future.
• Try to move parish governments away from charging property taxes on business inventory by offering them a one-time financial payment to end the tax. Parishes also would receive the ability to give partial exemptions of the tax to businesses by reducing the assessed value of the property.
• Make it harder for lawmakers to pass new property tax breaks
Amendment 2 is an all-or-nothing vote. While many parts are interwoven within Article VII of the state constitution, voters can't vote for only some changes. PAR breaks down the hefty amendment into a few main topics.
Below is a summary of some of the major parts of the amendment.
Tax Authority
Should the amendment pass the cap for the individual income tax rate would be lowered from 4.75% down to 3.75%. Taxpayers would not feel any difference in this because the rate has already been lowered by the legislature to a flat 3%. This would just change the cap should the state ever need to raise it again.
The amendment doubles the standard deduction for anyone over the age of 65 starting in the 2026 tax year. It also aims to raise the vote requirement within the legislature to add tax exemptions or credits,
It also aims to remove the limit on the amount of money local governments can get from severance taxes generated by the oil and gas industry, and other mineral production. This could mean more money to local governments, and less in the state general fund for the legislature to spend.
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Government Growth Limit
The state already has a limit on how much it can spend each budget cycle. There are mechanisms for the state to vote to lift the cap if there is a windfall of money like the state saw in 2023 from federal assistance and surplus dollars coming through after the pandemic.
This amendment will create a new 'Government Growth Limit' which would be lower than the expenditure limit already in place. The number would be calculated through population change and inflation. Once the state reaches that spending limit, anything over it can only be spent on one-time investments, not recurring expenses.
This limit has some exceptions such as federal money, money transfers, money spent from dedicated funds, etc. It is not clear, according to PAR, how much this could constrain spending on government programs. If lawmakers wanted to spend over the growth limit they would need a ⅔ vote of the House and Senate to do so.
Merger of Savings Accounts
The proposed amendment would combine the Budget Stabilization Fund and Revenue Stabilization Funds, both containing billions of dollars. This would increase the cap on deposits into the singular account.
However since the cap would be met in the Budget Stabilization Fund with the combination of the two funds, new money would likely not need to be deposited into the account for years. It could be seen as a way to free up spending money for the legislature rather than squirreling it away for a rainy day.
Teacher Pay and Trust Funds
There are a number of education-related funds that are used for various needs. The amendment would close down the Louisiana Education Quality Trust Fund, Louisiana Quality Education Support Fund, and Education Excellence Fund to use their balances to pay down teacher retirement debt.
That cost savings for districts will be required to make the teacher pay stipend of $2,000 for teachers and $1,000 for support staff. This is not a new pay raise, only keeping the previous stipend as a permanent fixture. If this is not done teachers would face either a pay cut or the legislature would have to find another way to cover the difference in the budget.
Any district that does not pay into the teacher retirement accounts, such as charter schools, or those who won't make enough to cover the full stipends have been verbally promised by the legislature they will pay for it.
Another section of the amendment makes various organizational changes to numerous fund accounts.
What is DOGE, and what's it doing?
Property Taxes
The amendment looks to move some of the property tax exemptions to state law to make it easier for the legislature to change them, with some guardrails of higher vote counts needed.
While the homestead exemption will not be touched, the state is urging parishes to move away from charging the inventory tax on businesses. The state would offer one-time payments to each parish should the move to phase out the tax.
If the Sheriff, school board, and parish governing authority approve the phase-out, they could be paid $10-15 million depending on how fast the tax is phased out.
If the amendment does not pass, the tax code will remain in its current form. The funds are not closed or organized, and there will not be a new growth limit, etc.
The lawsuit filed in the 19th JDC argues the ballot language is biased and does not fully encapsulate all that it entails. The plaintiffs plan to file a motion for an injunction later this week.
Read more about the breakdown of the amendments on the March 29 ballot and the background on the arguments in the PAR Louisiana guide.
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