By almost any measure, Louisiana lawmakers took up some weighty issues during the 2021 legislative session. The fact that they weren’t able to accomplish everything to the degree some had hoped at the outset, doesn’t diminish the fact that there were some major accomplishments this year.
Even though this was a “fiscal” session of the Legislature, that doesn’t always mean there’s a big focus on fiscal policies, but this year there truly was. Legislative leaders embarked on an ambitious agenda to simplify the collection of sales taxes and make significant structural changes in a number of high-profile tax policies.
They weren’t able to pull off everything they were trying to do, but the things they accomplished were significant. Louisiana’s top individual income tax rate of 6% is the highest in the region, even though our income tax burden is relatively low. Lawmakers approved legislation bringing that top rate down to 4.25% making it one of the lowest rates in the country of states that have an income tax.
By removing a tax deduction that virtually no states have, it allowed them to lower the rates, bring in roughly the same amount of revenue, and do it all with little if any impact on most taxpayers. Ultimately, it will also make Louisiana much more competitive with other states in our region.
It was hoped that same approach would bring a similar reduction in corporate income tax rates, but this time the dollars didn’t quite add up. Lawmakers were able to lower the top rate from 8% to 7.5%, but the bigger change was to use the dollars they had available to reduce the counterproductive corporate franchise tax.
The other big tax item on the agenda had to do with simplifying the collection of state and local sales taxes, which is a nightmare for many Louisiana businesses. Untangling that entire mess will probably take years, but the move to have a more centralized approach to sales tax collections is a positive step forward.
The asterisk next to all of these is that while the Legislature approved these measures overwhelmingly, they all involve constitutional amendments that must now be approved by voters. It’s also worth noting that all of these measures are aligned with work CABL has done for years, serving on various tax task forces and partnering with the Committee of 100 and the Public Affairs Research Council on our RESET Louisiana initiative.
Transportation was another big issue this session. Plans to increase the gasoline tax for the first time in more than 30 years were scrapped early and instead lawmakers began looking for other ways to put more money into infrastructure. In the end they decided to take the state’s existing sales tax on vehicles and begin a phased-in dedication of 60% of those revenues to infrastructure. That will ultimately represent an additional $300 million in funding for roads and bridges, but it will generally come at the expense of the State General Fund which supports a wide range of state services including education and health care.
In addition to that, lawmakers earmarked more than $500 million in one-time federal relief funding to infrastructure.
After years of budget cuts or basically flat funding, higher education saw the largest reinvestment in students, faculty, colleges, and universities in more than a decade. The increase of more than a $100 million will fully fund TOPS, expand financial aid to economically disadvantaged students, increase access to workforce training, and help repair some of the crumbling infrastructure on campuses across the state.
In K-12 education there was a major focus on early literacy as lawmakers passed initiatives that will help improve reading and the teaching of reading in grades K-3 along with a framework to assist struggling students in later grades. There were also measures to provide additional tutoring and support for students, expand certain school choice options, and give teachers an $800 pay raise.
Progress for early childhood education was more of a mixed bag. Lawmakers did take a number of steps to improve early education opportunities by passing legislation to make kindergarten in Louisiana mandatory and dedicating a portion of future proceeds from sports wagering to a fund to help expand access to quality child care. In addition, in response to legislative requests, BESE approved more than $30 million from federal relief funds to expand access to early care and education for economically disadvantaged families. But those dollars are temporary, and lawmakers will face a major challenge in coming years to maintain and grow that investment to assist working families with children.
Finally, if the goal of lawmakers was to aim high in 2021, they certainly did. They discussed, debated, and ultimately passed legislation dealing with big issues and big ideas. Not all of it was perfect and some could lead to new challenges in the future.
But they weren’t shy about confronting important matters and, to a large degree, particularly in the area of tax reform, they were successful. It’s often unclear at the end of legislative sessions whether anything really substantive was accomplished. This year there were significant accomplishments that CABL believes will help move Louisiana forward.