Merge pull request #2247 from PolicyEngine/PavelMakarchuk/issue2246

Louisiana flat tax post

src/posts/articles/louisiana-flat-tax.md

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+Last week, Governor Jeff Landry (R-LA) signed [HLS 243ES-13](https://legis.la.gov/legis/ViewDocument.aspx?d=1390576), which reforms several parts of the individual income tax code:
+
+1. Converting the current three income bracket structure of 1.85%, 3.5%, and 4.25% into a flat tax at a rate of 3%.
+
+2. Introducing a standard deduction of $12,500 for single and separate filers and $25,000 for all other filing statuses.
+
+3. Repealing personal exemptions: $4,500 per filer, $1,000 per dependent, and $1,000 additional for aged and blind filers.
+
+4. Increasing the exemptions for retirement and disability income from $6,000 to $12,000.
+
+We at PolicyEngine have updated our model to reflect these changes and analyzed their effects on the state of Louisiana and its residents.[^bill]
+
+[^bill]: HLS 243ES-13 also converted the graduated corporate tax rate to a flat 5.5% rate, increased the state sales tax from 4.45% to 5%, and eliminated the corporate franchise tax. PolicyEngine does not currently model these policies.
+
+Key results for 2025:
+
+- Costs $1.3 billion
+
+- Reduces taxes for 82% of Louisiana residents and raises taxes for 0%
+
+- Reduces the state’s Supplemental Poverty Measure by 0.8%
+
+- Increases the Gini index of income inequality by 0.3%
+
+_Use PolicyEngine to [view the full results](https://policyengine.org/us/policy?focus=policyOutput.policyBreakdown&reform=2&region=la&timePeriod=2025&baseline=71680&household=49786) or [calculate the effect on your household](https://policyengine.org/us/household?focus=input.household.taxYear&reform=2&region=la&timePeriod=2025&baseline=71680)._
+
+## Household Impacts 2025
+
+To see how families in Louisiana would be affected by the discussed tax changes, let’s examine a few relevant household compositions.
+
+**Table 1: Change in Net Income Based on Household Composition**
+
+| Household Composition                          | Change in Net Income                                                                                                                              |
+| ---------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------- |
+| Single, No Children, No Earnings               | [$0](https://policyengine.org/us/household?focus=householdOutput.netIncome&reform=2&region=la&timePeriod=2025&baseline=71680&household=49781)     |
+| Single, One Child, LA Minimum Wage             | [$137](https://policyengine.org/us/household?focus=householdOutput.netIncome&reform=2&region=la&timePeriod=2025&baseline=71680&household=49783)   |
+| Married, Two Children, Median Household Income | [$423](https://policyengine.org/us/household?focus=householdOutput.netIncome&reform=2&region=la&timePeriod=2025&baseline=71680&household=49786)   |
+| Married, Three Children, $500,000 Income       | [$5,616](https://policyengine.org/us/household?focus=householdOutput.netIncome&reform=2&region=la&timePeriod=2025&baseline=71680&household=49788) |
+
+The changes in the tax code benefit all the households above, except for a single adult with no earnings as they had no previous tax liability. A single parent with one child earning $15,080 (Louisiana’s full-time [minimum wage](https://www.ncsl.org/labor-and-employment/state-minimum-wages) equivalent) would see their tax bill drop by $137. A married couple with two kids with earnings at the state’s [median household income](https://www.census.gov/quickfacts/fact/table/LA/POP060210) would gain $423 from the individual income tax changes. However, a family making $500,000 would see the largest increase in their net income by far, paying $5,616 less in taxes in 2025. Below is a graph displaying the change in net income for the third example based on household income.
+
+**Figure 1: Change in Net Income for a Married Couple with Two Children Based on Household Income**
+
+![](https://cdn-images-1.medium.com/max/2000/0*bhTvRZmrkutW2pUL)
+
+## Statewide Impact 2025
+
+Using PolicyEngine static modeling, the individual income tax provisions enacted in Louisiana’s special legislative session will cost the state [$1.3 billion for tax year 2025](https://policyengine.org/us/policy?focus=policyOutput.budgetaryImpact.overall&reform=2&region=la&timePeriod=2025&baseline=71680&household=49786), aligning with [Gov. Landry’s cost projection](https://apnews.com/article/tax-bill-louisiana-landry-ec1a84124c751f32b9dcee6174dc9af2). [82% of Louisiana residents](https://policyengine.org/us/policy?focus=policyOutput.winnersAndLosers.incomeDecile&reform=2&region=la&timePeriod=2025&baseline=71680&household=49786) would see an increase in their net income: 99% of those in the upper half of the income distribution and 65% of those in the bottom half. While the bottom tax rate rises from 1.85% to 3%, the higher standard deduction prevents filers from having a higher income tax liability.
+
+**Figure 2: Winners and Losers of Louisiana Individual Income Tax Changes**
+
+![](https://cdn-images-1.medium.com/max/2000/0*FUDVEC4_M1YfLgDT)
+
+The reform cuts taxes by an average of [$709 per household](https://policyengine.org/us/policy?focus=policyOutput.distributionalImpact.incomeDecile.average&reform=2&region=la&timePeriod=2025&baseline=71680&household=49786), with the average amount rising at each income decile.
+
+**Figure 4: Average Benefit of Louisiana Individual Income Tax Changes by Decile**
+
+![](https://cdn-images-1.medium.com/max/2000/0*X4r5pcECxr0fRuwl)
+
+The tax changes would reduce Louisiana’s poverty rate by 0.8% and deep child poverty rate by 1.5%, applying the Supplemental Poverty Measure. Furthermore, the reforms would increase the state’s Gini index of income inequality by 0.3%.
+
+## Conclusion
+
+The individual income tax changes signed into law by Gov. Jeff Landry will reduce state revenues by $1.3 billion in 2025. 82% of Louisiana residents will see an increase in their net income from the analyzed provisions, disproportionately those in higher-income households. The top quintile would receive 57% of the tax savings while the bottom quintile would reduce 1.4%.
+
+As policymakers evaluate reforms such as these, analytical tools like PolicyEngine offer critical insights into the impacts on diverse household compositions and the broader economy.
+
+We invite you to explore our [additional analyses](https://policyengine.org/us/research) and use [PolicyEngine](https://policyengine.org/us) to calculate your own tax benefits or design custom policy reforms.

src/posts/posts.json

@@ -968,5 +968,14 @@
     "authors": ["max-ghenis", "pavel-makarchuk"],
     "filename": "givecalc.md",
     "image": "givecalc.png"
+  },
+  {
+    "title": "Louisiana Transitions to a Flat Tax",
+    "description": "Analysis of the individual tax changes signed into law by Governor Jeff Landry.",
+    "date": "2024-12-10 09:30:00",
+    "tags": ["us", "featured", "louisiana"],
+    "authors": ["david-trimmer"],
+    "filename": "louisiana-flat-tax.md",
+    "image": "louisiana-flat-tax.webp"
   }
 ]