(The Center Square) – The Louisiana Tax Institute reviewed previous tax reform legislation set in place during a third special session last year in November.
The third extraordinary special session last year approved nearly 15 bills, some effective throughout December and January. One takes effect in 2026.
Bills approved included House Bill 2 which provided a flat rate for purposes of calculating corporate income tax.
HB 2 also terminated specific corporate tax income exemptions, deductions, and credits.
HB 5 required schools to provide salary increases for teachers and employees from specific savings.
HB 10, which took effect in December, concerned the state sales and use tax rate, including exemptions, exclusions, and credits claimed against these taxes. HB 10 also modified specific income tax deductions and credits while providing a flat rate of income tax for individuals, estates, and trusts.
Overall feedback has been positive since the bills have been enacted, according to the Louisiana Tax Institute in Tuesday’s meeting. The income tax reduction is very popular, and it recognized something different needed to be done.
While most changes went into effect at the beginning of this year, HB 7 goes to voters on March 29.
HB 7 revises the state constitution to lower the maximum income tax rate and double the standard deduction for citizens over 65.
A teacher salary increase is now mandated in constitutional language by HB 5. HB 5 provided a $2,000 salary increase to teachers. The increase came from the state’s payment of unfunded accrued liabilities of the Teachers’ Retirement System of Louisiana. Teachers received $2,000, and other school employees received $1,000.
Taxpayers saw the effects of the individual tax income changes from Act 10, HB 10 as of Jan. 1.
HB 10 enacted a flat 3% individual income tax rate. Retirement income exemption doubled from $6,000 to $12,000. The Tax Institute noted this makes the state more competitive for retirees.
The individual standard deduction nearly tripled from $4,500 to $12,500 for single and married filing separate filers. Married joint filers, head of household, and surviving spouses’ standard deduction increased from $9,000 to $25,000.
While taxpayers saw a positive change to their individual tax rate, HB 10, Act 11 did increase the state sales tax from 4.45% to 5%. This increase went into effect on Jan. 1. Beginning in 2030, however, it will reduce to 4.75%.
The state sales tax base rate of 5% combines with the city or parish local sales tax, making total sales tax nearly 10% for most Louisiana residents. According to a tax report, this puts Bossier Parish at 10% combined sales tax, Caddo Parish at 9.6%, East Baton Rouge Parish at 10.5%, and West Baton Rouge Parish at 10.25%. Some parishes, like Calcasieu Parish, now pay 10.75% in combined sales tax.
With an overall positive change from the enacted bills, the Senate is still looking to have one more meeting before the legislative session to address bill language and other items.