Louisiana is potentially facing a significant budget crisis due to upcoming tax cuts, including a possible income tax reduction set for January 2026.
A 2021 state law mandates income tax rate reductions if specific revenue and savings thresholds are met, which preliminary estimates suggest might have been reached.
If confirmed in December, the automatic income tax cuts could increase the state’s budget shortfall for the next fiscal year by $100 to $200 million, pushing the deficit up to as much as $787 million.
Currently, Louisiana’s residents pay an income tax rate of 4.25% for earnings over $50,000, 3.5% for income between $12,500 and $50,000, and 1.85% for earnings below $12,500.
It’s not clear what the new rates would be under the tax cut, but the projected loss of revenue from these reductions could amount to $200 to $400 million annually, significantly exacerbating future budget shortfalls.
Governor Jeff Landry’s administration is concerned that the potential income tax cuts would force major budget reductions in critical areas like higher education, public school teacher pay, and disability