BATON ROUGE, La. — The legislature in Louisiana, largely controlled by the GOP, made a significant move on Friday by approving tax reductions for both personal and corporate income in exchange for an increase in the statewide sales tax. This outcome presents a mixed achievement for Governor Jeff Landry, whose initial plans for tax reform encountered significant pushback from lawmakers and interest groups, largely influenced by the state’s difficult fiscal challenges.

The passage of most of the proposed tax measures marks the conclusion of a special legislative session that Governor Landry initiated on November 6, aimed at creating a more favorable tax environment for businesses, boosting job growth, and reversing the trend of residents leaving the state. This marks the third special session Landry has called since taking office in January.

This comprehensive legislative package includes measures such as a permanent increase of $2,000 in teachers’ salaries and doubling the standard deduction for residents aged 65 and above. It raises the state sales tax to 5%, while also fulfilling Landry’s objective of reducing personal and corporate income tax rates. In addition, it lifts the corporate franchise tax of 0.275%, which pertains to businesses generating over $500 million in annual revenue.

The new corporate income tax will now carry a flat rate of 5.5%, a decrease from the previous top rate of 7.5%, although Landry’s initial request was for a 3.5% flat tax. Additionally, lawmakers approved a 3% flat rate for individual income tax and significantly increased the standard deduction for individuals. Previously, individuals earning $50,000 or more were taxed at a 4.25% rate.

Representative Julie Emerson, a Republican who played a pivotal role in advocating for the income tax reforms, expressed her confidence in the financial benefits of the tax cuts, stating, “What I’m very confident in is that everyone’s going to have more money in their pocket at the end of the day with the personal income tax reductions.”

Despite the personal income tax cuts resulting in an annual revenue loss of $1.3 billion, Landry had originally proposed taxing a variety of services, including car washes, dog grooming, and lobbying services, to offset this reduction. He also aimed to eliminate substantial tax incentives associated with restoring historic buildings and supporting the film industry, but these proposals were rejected, necessitating a larger-than-anticipated increase in the sales tax.

With the latest changes, Louisiana retains the distinction of having the highest combined state and local sales tax rate in the nation at 9.56%, as reported by conservative think tank, the Tax Foundation.