Jeremy Alford and David Jacobs: Will tax reform have to wait until 2027?

By JEREMY ALFORD and DAVID JACOBS
After voters rejected a constitutional amendment in March to overhaul state tax law, and in the wake of senators stalling a House-backed plan in recent days to cut individual income and sales taxes, anyone praying for bold and aggressive tax moves from the Louisiana Legislature may have to wait a year or two.
“I still think it’s a high priority,” said Rev and Fisc Chair Franklin Foil, adding the overarching goal of a zero-rate personal income tax won’t happen overnight.
While a sprinkling of lawmakers and tax advocates would like to see a special tax session called just prior to the 2026 non-fiscal regular session, which convenes March 9, waiting for the 2027 regular fiscal session is the most obvious vehicle for another drive down the tax reform highway.
Foil, who has been in elected office for 17 years and previously served in the House, wisely noted 2027 is also an election year for lawmakers.
“That’s a good message for people to be able to run on in an election year,” he said.
But why wait? Exactly why did senators choose to pause the tax cut package pushed by Ways and Means Chair Julie Emerson?
For starters, some folks wanted better numbers to judge the impact of the tax changes made by lawmakers last year, which included the elimination of the corporate franchise tax. Those changes just went into effect on Jan. 1.
“We would like to see how all these other changes play out,” said Revenue Secretary Richard Nelson. 
Uncertainty likewise clouds the outlook for federal funding, especially with much of Congress and President Donald Trump in a cutting mood.
“We wanted to be careful to see how that plays out,” Foil said of the flow of federal money, “to make sure we don’t put ourselves in a budget deficit situation.”
Alas, not all hope is lost for the ongoing regular session that adjourns next week.
There are still a few bills left alive this session that could fall under the heading of tax reform, including a potential constitutional amendment that was part of that same package voters rejected in March. 
First on this agenda is addressing the inventory tax, which provides significant revenue to local governments but is hated by businesses. HB 366 by House Commerce Chair Daryl Deshotel, which awaits a Senate floor vote, calls for a constitutional amendment that would allow parishes to opt out of charging the tax — also a provision of the failed constitutional amendment from March. 
Also pending final Senate passage is HB 383 by Rep. Ken Bass, which postpones next year’s scheduled sunset of the state tax credit corporations get for paying their inventory taxes to 2027, though it cuts the value in half for the final year.
While the bill carries a significant fiscal note, it passed the House with only four dissenting votes. 
HB 594 by Rep. Chance Henry also is subject to call in the Senate. The bill would replace the current graduated premium tax on property and casualty insurance to 2.8%, with triggers that could gradually bring the rate down to 1 percent. 
“While we have the highest rates [for insurance], we also have the highest tax on it,” Nelson said.  
HB 654 by House and Governmental Affairs Chair Beau Beaullieu, which purports to require that any new sales tax exemptions apply to all taxing authorities, has passed both chambers.
The inconsistency between state and local tax rules gets the state’s tax climate dinged by organizations like the Tax Foundation. 
(Nelson cautions the statute wouldn’t really have teeth. If another exemption that doesn’t follow the guidelines passes, it would represent the most recent legislative intent and supersede the older law, he said. The real solution for exemptions with only state or local applicability is for lawmakers and governors to stop creating them, Nelson added.)
Looking forward, what the state really needs, in lieu of tax reform, is significant economic growth that boosts revenue, according to Nelson, who said such possibilities are more likely now than when this term of state government began.
“From a tax perspective, I think we’re in a pretty competitive place right now,” Nelson said.
“People are going to be looking to invest.” 
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