Some wage earners could see a paycheck with a few dollars more next year. Starting Jan. 1, Louisiana will have a flat 3% individual income tax rate across the board. Changes from the special session that ended before Thanksgiving will also impact 2025 state income tax filing.

Corporate income will be taxed at 5.5%. State sales taxes will go from 4.45% to 5%. Research and think tank groups question whether lower income earners will see any gain, or worse.

“The bottom line effect of the total tax package on the state budget and taxpayers isn’t entirely clear,” according to the Nov. 26 report from the Public Affairs Research Council (PAR). “It’s possible lower-income earners may see most, if not all, of the money gained from the income tax cut paid out on the increased sales tax.”

Gov. Jeff Landry called the hashed out plan a win for all. In a speech closing the special session last Friday, he said four things were accomplished: a tax cut for everyone, a more competitive state, a pay raise for teachers and a simplified tax code eliminating special interest loopholes. (In his opening speech for that session, he said the current system had 215 exemptions.)      

Currently, individuals pay 1.85% for the lowest level of taxable income to 4.25% for the highest. The Council for a Better Louisiana in its report on the outcome of the session, said the 3% flat tax rate will be among the lowest in the country and lowest in the south.

Standard deductions will also change in the coming year, increasing from $4,500 to $12,500 for those who are single or married filing separately. Married, filing jointly, qualifying surviving spouse and head of household will see a $25,000 standard deduction.

Older adults may be able to keep more of their retirement earnings tax-free, as the retirement income exemption doubles from $6,000 to $12,000.

Good for some, but for all?

Invest in Louisiana, formerly the Louisiana Budget Project, a non-partisan think tank that drives policy change to advance economic prosperity for all, issued a statement after the last legislative session that included the following:

Tax changes will saddle low-income Louisianans with higher costs for everyday purchases, cuts in corporate income and franchise taxes will primarily benefit out-of-state shareholders and the sales tax increase will mainly fall on everyday Louisiana residents.

The  increase in state sales tax from 4.45% to 5%  means paying 55 cents more on every $100. That might not sound like much. However, at the current 4.45% rate, Louisiana had the largest average local and state sales tax in the nation, according to the PAR report.

Landry did not want to raise the state sales tax, according to another media outlet.  He wanted to tax certain luxury services instead. Legislators didn’t go for it, or for his idea of prohibiting local governments from charging sales taxes on prescription drugs. The state does not levy sales taxes on prescription drugs. Nor does the state tax food that is prepared for home consumption and residential utilities.    

The local sales tax in Calcasieu Parish, which is charged in addition to state tax on purchases, ranges from 3.25 to 7.75%.

The parish local uniform rate, according to the Calcasieu Parish School Board Sales and Use Tax website, is 5.75%. That means, combined with the 5% state tax, the total tax paid on $100 would be $10.75. The local tax is lower in the unincorporated Ward 1 area of Moss Bluff and Gillis at 4.25%. It’s  3.25% on food for home consumption and prescription drugs. However, it can be higher, as much as 7.75% for purchases in economic development districts.