Status of Tax Reform in Louisiana
While voters in Louisiana may have rejected all four of the constitutional amendments on Saturday’s ballot (the Secretary of State reported just over 21% voter turnout), including Amendment No. 2 which contained significant tax measures, efforts at tax reform are likely to resume during the Legislative Session that convenes next month. Since the upcoming session will be “fiscal,” legislators are likely to remain focused on budgetary and tax-related matters.
The policy changes sought to be made by Amendment 2 included capping the individual income tax rate at 3.75% (currently the cap is 4.75%), creating tighter control on annual increases in state spending tied to state population changes and inflationary factors, and implementing a permanent teacher salary increase. For now, Louisiana’s current income tax structure and spending limits remain intact. In addition, Saturday’s vote means no automatic tax deductions for seniors, no repeal of the property tax on business inventory, and no guaranteed teacher pay raises.
Amendment No. 2 also would have given parishes the option of repealing the property tax on business inventory (and an opportunity to get a one-time payment if inventory tax is irrevocably eliminated) and removed most property tax exemptions from the constitution (except for homestead and churches) placing their continued existence in the hands of legislators. Enacting new property tax breaks would have been harder upon the passage of Amendment No. 2, as such action would have required a ¾ vote by the House and Senate.
The failure of constitutional Amendment No. 2 to pass does not directly affect the changes to Louisiana’s income tax rates or the repeal of the corporate franchise tax made during the special session last November. Likewise, the broadening of the sales & use tax base to include sales of digital products, software as a service, and information services, and the elimination of numerous sales & use tax exemptions and exclusions that went into effect on January 1, 2025 were not contingent on the passage of any constitutional amendments.
Amendment No. 2 did contain a provision that would have brought Louisiana closer to uniformity with respect to state and local sales and use tax collection. The amendment would have prohibited the legislative enactment of any new sales tax exclusion or exemption, unless it applies to both state and local sales taxes, starting January 1, 2026.
And Amendment No. 2 would have removed a limit on the amount of funds local government could receive from severance taxes generated by oil, gas and other types of mineral production on land in their parishes. This would have increased payments to parishes and resulted in less money available to spend in the state budget.
The Legislature is set to convene at noon on Monday, April 14, 2025, with Final Adjournment to be no later than 6:00 p.m. on Thursday, June 12, 2025. Liskow’s tax lawyers will be following the Legislature during the upcoming fiscal session and monitoring Louisiana’s continued efforts at tax reform to retain and attract residents and business.
For further questions regarding this update, please contact Liskow attorneys Bob Angelico, Caroline Lafourcade, or Kevin Naccari and visit our Tax practice page.
