Louisiana House passes bill that would further cut state's new income tax rate

Yahoo

08-05-2025

BATON ROUGE–The House of Representatives voted 86-13 Wednesday to approve a bill that might further cut the state's new flat individual income tax rate and create a tax break for seniors starting in 2027.
But the changes could occur only if voters were to pass a constitutional amendment allowing the state to shift hundreds of millions of dollars from reserve funds into the state general fund.
Wednesday's vote was just the first step in a lengthy process.
Under the bill that the House passed, Louisiana's personal income tax rate would decrease to 2.75% from 3% beginning Jan. 1, 2027, if voters approved the constitutional amendment.
In addition, the bill, House Bill 667, calls for residents 65 and older would be eligible for an extra income tax deduction equal to the standard deduction for single filers, currently $12,500, effectively doubling their deduction under existing law.
But the Louisiana Senate still needs to consider the bill, and both chambers would need to pass a separate bill creating the constitutional amendment. Voters rejected a much more complicated amendment in March, and they would need to approve a stripped-down version by sometime next year for the changes to happen by 2027.
Late last year, Gov. Jeff Landry signed a bill changing the state's personal income tax to a flat 3% rate from a tiered system with the highest rate of 4.25%.
According to the Legislative Fiscal Office, the bill would substantially impact Louisiana's budget.
The income tax rate reduction alone is projected to reduce state general fund revenue by $54.5 million in 2027, followed by $310.3 million in 2028 and $250.8 million annually in subsequent years.
The new deduction for residents aged 65 and older would further reduce revenue by $67.6 million in 2028, $68.6 million in 2029 and $69.7 million in 2030, assuming seniors have enough income to fully claim the benefit.
Bill author Rep. Julie Emerson, R-Carencro, said the proposal signals to voters that lawmakers intend to use newly available general fund dollars to offer tax relief, especially for seniors.
'We know that our citizens want to see some relief,' Emerson said. 'This shows them upfront that's what we want to do.'
She also argued that Louisiana must keep pace with regional neighbors who are aggressively reducing or eliminating their income taxes.
'We want to continue to lower those rates like the states around us have,' Emerson said. 'Texas being at zero and Florida being at zero and our neighbors in Mississippi are getting on a pathway to zero income tax, I want Louisiana to keep up in order for our economy to continue to grow so we won't be having these conversations about fiscal stability because our economy will continue to grow.'
Supporters believe lowering income taxes will make Louisiana more attractive for businesses, retirees and workers, helping to expand the economy.
Rep. Matthew Willard, D-New Orleans, who opposed the bill, raised concerns about the timing and long-term fiscal impact.
'The current tax rates haven't even been in effect for half a year,' Willard said. 'Don't you think it would be more prudent to have more data for possibly a year or two?'
Willard also questioned whether Louisiana could afford both the tax cuts and maintain commitments like teacher stipends. Emerson responded that the state's Revenue Stabilization Fund, which received over $1 billion last year, would help cover the reductions.
'We feel comfortable with the numbers as they are,' Emerson said.
Another layer of uncertainty involves potential budget cuts in Washington. Willard noted that federal policy changes could affect Louisiana's revenue streams from certain federal agencies.
'Is this a good time to make these decisions with so much uncertainty happening at the federal level right now?' Willard asked.
Emerson acknowledged the unpredictability but argued the state should not delay.
'Every year we debate these things, and there are always changes at the federal level,' Emerson said.
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