Louisiana State Sales Tax Increase: How Much, How Long?
- Mar 7, 2016 | Gail Cole
It’s decided: the state sales tax rate in Louisiana will increase by at least 1% on April 1, 2016. What is not clear is whether or not it will be further increased and how long a rate increase will be in place.
Soon after taking office, Democratic Governor John Bel Edwards urged the legislature to increase the sales tax rate by one cent in order to “return to a sensible, balanced approach” and set the state’s budget straight. House Bill 62 was written to do just that—increase the state sales tax rate by 1% for a period of 18 months. The House approved the bill and sent it to the Senate, which extended the rate increase to a period of 5 years. The Senate’s amendments were rejected by the House.
As of this writing, the exact duration of the rate increase is still to be determined.
Meanwhile, House Republicans are pushing for an even greater rate increase. They propose an increase of 1.25 or 1.75 cents for up to 2 years, dropping down to a 1 cent increase for an additional year or two.
The proposal has the support of many in the business community. However, Gov. Edwards and leading Democrats are refusing to consider it until other business taxes are considered. “I am not open to it until there is due consideration to all these other measures,” he told reporters, while pointing to a sheet listing numerous proposed business taxes.
A one penny sales tax increase is expected to generate $214.7 million during its first few months and then $883 million during the next fiscal year. The additional rate increase proposed by House Republicans would generate an additional $161 million this budget year and $662 million during the next one.
The state has a budget deficit of $900 million.
Out of time
Legislators have little time to come up with a solution, as the legislature is scheduled to adjourn on Wednesday, April 9, at 6 p.m. The governor has said that state universities will have to start laying off people and instituting furloughs in two weeks if the budget gap isn't lessened by the time the legislature adjourns.
Sales tax rate changes may help close budget gaps, but they also create compliance headaches for businesses. Sales tax software helps simplify tax management. Learn how it works.