Brief: House Bill 514 – Sales tax extension

Brief: House Bill 514 – Sales tax extension

Summary: House Bill 514 proposes to shift nearly $400 million a year from the state general fund – where it supports public education, health care and other important state services – into the state Transportation Trust Fund to pay for infrastructure projects. It would permanently extend a “temporary” 0.45% state sales tax that is due to expire in 2025, but would phase out a 2% sales tax on business utilities that was included in a 2018 tax compromise. 

This bill by Rep. Tanner Magee started out as an attempt to apply the 4.45% state sales tax to medical marijuana. It was heavily rewritten on the Senate floor to add the transportation and business utilities language. 

Louisiana already has one of the highest overall (state and local) sales tax rates in the country. Our high sales tax is the main reason our tax structure is deeply regressive – meaning low-income households (and Black families) pay a higher effective tax rate than wealthy families. This bill would permanently enshrine that imbalance in state law, while creating a nearly $400 million revenue shortfall that would likely require cuts to state services. 

By also phasing out the business utility sales tax, the bill provides a tax cut for some of Louisiana’s largest corporations while requiring low-income families to pay indefinitely higher taxes for fewer state services. 

While Louisiana has a massive backlog of transportation projects that need funding, the best way to do so is by raising the state gasoline tax. Louisiana’s gas tax has not been increased since 1990, and it has lost more than half its purchasing power over the last 31 years. 


Problems with HB514:  

  • Making the 2018 sales tax permanent would also make Louisiana’s tax system permanently more regressive, and make it more difficult to reduce our over-reliance on the state sales tax.
  • This bill cuts taxes for big business, maintains a tax increase on working families, and creates a huge budget hole. The 0.45% sales tax raises about $378 million per year. That’s more than the annual state general fund budget for the Department of Children and Family Services, the Department of Culture, Recreation and Tourism, Louisiana Economic Development, the Department of Agriculture, Nutrition and Forestry, the Secretary of State and the Lieutenant Governor COMBINED. 
  • Louisianans were promised that the sales tax increase renewed in 2018 would be temporary – that it was a necessary compromise to buy more time for other reforms. Making the temporary sales tax permanent – but only for working people, not businesses – violates that promise.


A better alternative: While imperfect, gas taxes are how we currently pay for transportation infrastructure. Louisiana’s gas tax is among the lowest in the country. Raising the gasoline tax could generate substantial review for the state without creating a general fund budget shortfall. To mitigate the effect of higher gasoline taxes on low-income Louisianans, the Legislature could raise the state’s minimum wage to $15 an hour.

In the meantime, legislators should replace the revenue from the temporary sales tax with other taxes. A great place to start would be to create a higher tax bracket for income earned above $500,000 and $1 million per year.

– by Jackson Voss