The Advocate: Jeff Landry’s tax package was in jeopardy. Here’s how he and Cameron Henry saved it.

BY TYLER BRIDGES | Staff writer |Dec 1, 2024 Updated Dec 3, 2024

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Gov. Jeff Landry’s plans were imperiled on Nov. 19, nearly two weeks into a special legislative session he convened to pass his ambitious tax package.

The Republican-controlled House had resisted one bill to raise sales taxes and had passed a second measure, but only barely — and with the support of four Democrats. Whether Landry could now get the entire package through the Republican-majority Senate was an open question. It would take at least a two-thirds vote.

Landry needed to find a new way to raise sales taxes to offset the income tax cuts, while bringing aboard enough Senate Democrats and minimizing Republican defections.

And to pass his entire proposal, he would have to rely on Senate President Cameron Henry, R-Metairie, who led the Senate in bucking Landry on several high-profile issues earlier in the year.

On Nov. 19, Landry met with Senate Democrats in negotiations that led him to agree to their demands for higher spending on education and social issues. A day later, Henry unveiled a plan that would require ultraconservative Republicans to vote for the sales tax increases if they wanted to cut income taxes by merging both proposals into a single bill.

Landry cajoled legislators to get on board. When that approach didn’t work with some, he used the time-honored gubernatorial hammer of threatening to withhold money for pet spending projects in legislative districts, legislators said.

To finalize the details, Henry shuttled among meetings with Senate Republicans in the Capitol basement, Senate Democrats in his first-floor office, and Landry in his fourth-floor office. Henry also huddled with House Speaker Phillip DeVillier, R-Eunice, to ensure the Senate revisions would pass the House. They all agreed to keep a variety of tax breaks sought by influential special interest groups.

The governor also released two letters aimed at placating anti-spending conservatives worried that his plans would inflate the state budget. Increasing the state sales tax to 5% will raise $1.1 billion per year, nearly offsetting the $1.3 billion in income tax cuts. Thanks to other revenue-raising tax measures, the plan is likely to produce more money next year.

Under the final version, individual and corporate income taxes will drop, the sales tax rate will rise, a much-maligned tax on corporate equity will disappear, and tax subsidies for film productions and the renovation of historic properties will continue but with a haircut.

Landry and legislators authorized voters to decide in March whether to rewrite the tax section of the state constitution, a move that would replace a temporary teacher pay hike with a permanent raise and give seniors a tax reduction.

On Nov. 22, the Senate blessed the final package. The House followed suit an hour later.

Landry declared victory

Landry released a video immediately afterward to declare victory.

“This tax package is a win for the people of Louisiana, a win for the businesses in Louisiana and a win for those looking for a reason to call Louisiana home,” he said in a five-minute address.

To be sure, the governor left out several key facts in his remarks.

Landry had laid down a marker for his tax plan when he kicked off the special session on Nov. 6, calling for legislators to simplify the tax code by eliminating many tax breaks.

“No free rides, no special treatment, no preferential advantages for the chosen few,” Landry said. “Government should not be picking winners and losers in any tax code. But unfortunately, that’s exactly what we have done for far too long.”

Adding the tax breaks back to pass the final package, however, kept up that tradition, said Manish Bhatt, a state tax analyst for The Tax Foundation, a Washington, D.C., nonprofit favored by conservatives. He cited the continuance of the film and historic building tax credit programs and lawmakers’ failure to pass Landry’s initiative to begin taxing services.

“In having incentives that favor an industry or business, the tax code is picking winners and losers,” Bhatt said. “That’s not what a sound tax policy is.”

For weeks, the governor had touted an analysis by The Tax Foundation. It showed his package would boost Louisiana from 40th in the group’s State Business Tax Climate Index to eighth. Moving up that much would show the world that Louisiana was open for business, the governor said repeatedly.

The final version of the plan moves Louisiana up to 26th, Bhatt said. Restoring the tax breaks granted to special interest groups hindered the state’s progress in the group's ranking.

“There’s room for further improvement,” Bhatt said.

Landry had also promised his plan would cut taxes for all residents, and he repeated that claim after the session ended.

“For every hardworking Louisianan, this tax package means one thing: More of your hard-earned money will stay in your pocket,” he said.

That didn’t quite happen, according to an analysis by Neva Butkus, state policy analyst for the Institute on Taxation and Economic Policy, a progressive nonprofit in Washington.

Tax plan favors wealthy

The poorest 20% of families, who earn less than $22,000 annually, will pay $5 more per year under the legislation because the sales tax hike will cost slightly more than the benefit from the income tax reduction. That's because the 5% state sales tax approved by Landry and legislators is 1 percentage point above the rate the House approved, Butkus’ analysis shows.

Meanwhile, the top 1% of families, with an average annual income of nearly $1.9 million, will receive a tax cut of $15,431 per year, according to Butkus.

As a result, Louisiana’s regressive tax system — where the poorest 20% pay twice as much of their income in taxes overall as the richest 1% — will become even more regressive, according to an analysis by the Institute on Taxation and Economic Policy.

“To no one’s surprise, the biggest beneficiaries were the same people who always win in Louisiana’s system — the rich and powerful,” said Peter Robins-Brown, executive director of Louisiana Progress, a Baton Rouge nonprofit.

That’s not how Landry sees it.

In his view, giving a bigger share of the tax cuts to big corporations and the wealthiest will produce an investment boom that will reverse the state’s population loss while John Bel Edwards was governor.

Population loss

Louisiana had 4,681,346 residents when Edwards took office in 2016 and 4,573,749 in 2023, his final year, according to figures supplied by Jim Richardson, a retired LSU economist.

Louisiana’s population dropped by 2.3% during those years, while the country’s population grew by 3.6%, according to Butkus.

Population loss is one of two metrics cited by Landry to measure the tax package’s success or failure in future years.

The other is median family income.

On average, families in Louisiana earned $42,200 in 2016 and $57,650 in 2023, according to Richardson’s figures.

That translated into an increase of 36%, which matched the national average, while Edwards was governor, according to Butkus.

Landry did not mention those figures during the tax battle.

Employment increase

Richardson’s data also show the number of nonfarm workers in Louisiana grew during Edwards’ last four years, from 1,843,025 in 2020, during the pandemic, to 1,960,770 in 2023.

These figures show that Landry inherited an economy that was growing and creating jobs, even as the population was declining, Richardson said.

Tax measures begin in the House. The various pieces of Landry’s plan sailed through until it came time for votes on House 9 and House Bill 10 on Nov. 14.

HB9 would have raised $500 million a year by extending the sales tax to 41 untaxed services, but House members balked at supporting it. As a result, Landry would have to make up for the lost revenue.

Meanwhile, HB10 would have renewed an expiring sales tax at 4%. It narrowly passed with 71 votes, needing at least 70.

Four Democrats — Reps. Ken Brass of Vacherie, Adrian Fisher of Monroe, Travis Johnson of Vidalia and Dustin Miller of Opelousas — came to Landry’s rescue. Ominously for Landry, six Republicans opposed it.

Henry and DeVillier adjourned the House until Nov. 18.

It was the following afternoon when Landry started meeting with the Senate Democrats in a conference room in his suite of offices at the Capitol.

Landry agreed to increase spending for Grambling University and for the three Southern University campuses by a total of $10 million annually for the next three years. He also agreed to not cut spending on early childhood education and to ensure that juveniles jailed in adult prisons will have access to education and vo-tech training programs aimed at keeping them from committing more crimes.

Landry made it clear to Democrats that he wanted bipartisan approval for his tax package, said Sen. Gerald Boudreaux, the Democratic leader. “We made it clear that if that was the objective, these were the things we needed. There were a lot of negotiations back and forth.”

Temporary sales tax

The Senate Democrats also insisted that increasing the sales tax rate to 5% be temporary. Both sides settled on five years, and then it would drop to 4.75%.

Even that posed a dilemma for Democrats. They would have to vote for a sales tax increase that hits the poor the hardest if they wanted to ensure having enough money for programs that serve their constituents.

Sen. Gary Carter, D-New Orleans, had expected to oppose the tax package but ended up supporting it.

“I voted to avoid devastating health care and education cuts and for Louisiana not to fall off a financial cliff,” Carter said. “I also voted to make sure we continued to have the historic tax credit and the film industry tax credits.”

Landry and Henry also wanted all of the Republicans on board, but the two leaders faced opposition to the proposed sales tax increase from three sharp-right conservatives: Sens. Blake Miguez of New Iberia, Heather Cloud of Turkey Creek and Valarie Hodges of Denham Springs.

Miguez and Landry ended up in a shouting match in a meeting in Landry’s office over Miguez’ refusal to commit to supporting the sales tax increase, senators said.

Miguez then tweeted out a call to the governor to focus more on reducing spending. Landry immediately responded, accusing Miguez in a tweet of “political posturing” and “worrying about one’s next political office.”

Miguez has expressed interest in running for the Acadiana-based seat held by U.S. Rep. Clay Higgins if Higgins challenges U.S. Sen. Bill Cassidy, a Republican up for reelection in 2026 who has been on the outs with President-elect Donald Trump.

On Nov. 18, to ensure the support of fiscal conservatives, Landry sent a letter to Henry and DeVillier saying he will create a “Fiscal Responsibility Program” to root out wasteful spending.

Three days later, Landry went a step further, promising to introduce “a standstill budget” next year that will include only budget increases mandated by law.

Miguez, Cloud and Hodges planned to vote for HB1, which would flatten the individual income tax rate at 3% and nearly triple the standard deduction for filers, and against the sales tax increase in HB10. Henry put them in a box by merging the two measures into HB10.

All three of them supported the final plan.

The tax package “is mandatory to put us on an equal ground and be competitive with leading states like Florida and Texas,” Hodges said in a text.

The Senate passed a blizzard of amendments to the tax package when it was before the Revenue & Fiscal Affairs Committee on Nov. 19 and again just before voting on the bills on Nov. 22.

Having worked out everything behind closed doors beforehand, no senators raised substantive questions about the final language in the bills. Nor did any ask for an explanation of exactly how much the bills would raise. The legislative number crunchers wouldn’t publish those figures until several hours after the votes.

The Senate approved HB10, 38-1, with only Sen. Royce Duplessis, D-New Orleans, voting no, and then quickly passed the other tax bills.

The House breezed through the same bills, approving HB10, 80-19.

Email Tyler Bridges at tbridges@theadvocate.com.