Louisiana revenues are down as tax code changes take effect
Excerpt from the article:
(September 11, 2025) Since the start of the year, coverage of the state's sales and use tax has expanded to include new categories of online content and services. The combined sales tax rate is increased to 5% until Jan. 1, 2030, when it is to be lowered to 4.75%.
"The state recently overhauled its tax structure," Moody's Ratings said in late August. "Combined with expected slower global economic growth, the tax reductions will keep fairly flat revenue and the state plans to maintain budgetary balance through cost control. Federal policy outcomes also pose a headwind for the state, particularly tariffs, and changes to Medicaid eligibility and disaster aid."
Moody's said it expects Louisiana state revenues to remain flat through fiscal 2029.
"There's been a reduction in severance taxes (to spur production) but that impacts sourced revenue," said John Mousseau, vice-chairman and chief investment officer of Cumberland Advisors. Severance taxes are taxes on the extraction of non-renewable natural resources.
Mousseau said he thought a "general slowdown in the economy affects things like contributions from hotel taxes" and this helped to explain the decline in Louisiana's revenues. There is a general slowdown in the United States economy, Mousseau said.
The University of Michigan's index of consumer sentiment indicates peoples' outlook on the economy is more pessimistic than it was a year ago and they are adjusting spending accordingly, Mousseau said.
"The decline occurs as oil prices drop significantly," said Joseph Krist, publisher of Muni Credit News. Louisiana has a substantial oil and natural gas industry. "Natural gas has been cheap. It's likely that oil services companies have seen reduced demand. It all leads to less profitability, which translates to less tax revenue."
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John R. Mousseau, CFA
Vice Chairman | Chief Investment Officer
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