(The Center Square) – Louisiana lawmakers are considering a major rewrite of Article VII of the state constitution as part of broader tax reforms proposed by Gov. Jeff Landry.
The proposed changes, discussed in a recent Department of Revenue briefing, would impact everything from prescription drug tax exemptions to local government funding and severance tax distribution.
One of the key changes in the proposal is the extension of the state’s 100% prescription drug tax exemption to local parishes. Currently, prescription drugs are exempt from state-level taxation, but this new measure would ensure that parishes also recognize this exemption, providing uniform tax relief for residents across Louisiana.
Landry’s plan aims to rectify what he describes as Louisiana’s outlier status.
“In Louisiana, we have the local governments usually assess a tax on prescription drugs,” Richard Nelson, Secretary of the Department of Revenue, said. “We don’t think people should pay the tax to be sick.”
He noted that this change would eliminate a 5-6% tax currently levied in some parishes, bringing Louisiana in line with most states that already prohibit such taxes.
Another major provision would double the standard deduction for seniors. Currently, Louisiana seniors over age 65 receive a standard deduction of $12,500, but under the proposed rewrite, this amount would rise to $25,000 for individuals and $50,000 for married couples.
Several provisions aim to remove specific funds from the state constitution and place them into statutes. This includes the Revenue Stabilization Fund, which would be moved to statute and rerouted to the state’s general fund.
Additionally, 15% of corporate income, franchise taxes, and severance tax collections would be deposited into a “rainy day” fund to further stabilize state finances during economic downturns.
The proposed rewrite also addresses teacher pay. Parishes would be required to provide salary increases for teachers and support staff, with the state covering a portion of the unfunded accrued liability for those payments.
Landry’s proposal to pay down $2 billion of the unfunded liability is central to this plan.
“That $2 billion payment would free up about $300 million a year in extra…freed-up revenue,” Nelson said, emphasizing that the savings could be used to fund a permanent 5% pay raise for teachers, replacing the current $2,000 stipend that has been offered in recent years.
Property tax provisions, except for the homestead exemption, would also be moved from Article VII into state statutes, streamlining local tax management.
The rewrite includes an optional inventory tax exemption for parishes. If a parish opts out of collecting the inventory tax, it would receive a one-time payment from the state, ranging from $1 million to $15 million, depending on past collections.
Additionally, the severance tax cap would be removed, changing the current 80/20 revenue split, which allocates 20% of severance taxes to local governments but limits their share to $1.2 million.
The overhaul, while broad in scope, seeks to make Louisiana more competitive and fiscally sound.
“We would go from basically in the bottom in tax competitiveness to the top, and it’s one of the best things we can do to grow the state, to bring jobs, to bring people back home,” Nelson said.
Landry’s administration says it hopes that by implementing these changes, Louisiana could attract investment, create jobs, and keep its best talent in-state.
