BATON ROUGE — As Louisiana residents file their state income taxes this spring, Gov. Jeff Landry is touting the real-world impact of sweeping tax reforms he signed into law late last year, saying residents are already seeing the savings in their refunds.
"When people file taxes this year, they are getting a bigger refund," Landry said. "The typical middle-class working family will save nearly $500, and the average working individual will save around $261, cutting their state income tax liability by nearly a third. Turns out the biggest jackpot in Louisiana this year was in your paycheck!"
The changes stem from a special legislative session Landry called in November 2024, just one day after the presidential election. The Legislature passed the package with bipartisan support on Nov. 22, and Landry signed it into law on Dec. 5, 2024. The reforms took effect Jan. 1, 2025, meaning this year's tax filing season is the first time Louisianans are seeing the changes reflected in their returns.
The centerpiece of the legislation is a flat 3% personal income tax rate, the lowest in the South and second lowest in the nation, replacing the state's previous graduated system, which taxed income at rates ranging from 1.85% to 4.25%. The standard deduction was nearly tripled, from $4,500 to $12,500, meaning married couples pay no state income tax on their first $25,000 of combined income. The standard deduction will also adjust automatically for inflation each year going forward.
Seniors received targeted relief as well. The retirement income exemption was doubled to $12,000, meaning a married couple over 65 can earn nearly $49,000 tax-free under state law.
On the business side, the corporate income tax was flattened to 5.5% from a previous top rate of 7.5%, one of the highest in the nation. The corporate franchise tax is set to be fully eliminated beginning Jan. 1, 2026.
The Tax Foundation, a nonpartisan tax policy research organization, called the reform a "significant pro-growth" package and estimated it would improve Louisiana's ranking on its State Tax Competitiveness Index from 40th to 26th in the nation, with the state ranking among the top 15 in four of the five major tax categories.
The income and corporate tax cuts come with a tradeoff, however. To offset an estimated $1.43 billion in reduced revenue, lawmakers agreed to temporarily raise the state sales tax from 4.45% to 5%, effective through Dec. 31, 2029, after which it will drop to 4.75%. The increase pushed Louisiana's combined state and local sales tax rate to approximately 10.6%, the highest in the nation, according to the Tax Foundation.
The package also extended the sales tax to digital goods and services such as streaming subscriptions and online games, which had previously been exempt.
Critics of the plan, including the Institute on Taxation and Economic Policy, a left-leaning policy organization, argued the reform disproportionately benefits higher earners while the sales tax increases fall hardest on lower-income residents. The group's analysis found that the lowest-income 20% of Louisiana households, averaging $12,700 in annual income, could see a small net tax increase under the full package.
Landry has framed the income tax reductions as a first step toward his long-term goal of eliminating the state income tax entirely, following the model of neighboring states Florida, Tennessee, and Texas, none of which levy a personal income tax.
