In the last legislative session, Louisiana Governor Jeff Landry introduced—and the Legislature ultimately approved—comprehensive changes to fiscal policy, which included lowering individual and corporate income taxes, repealing and phasing out punishing taxes on businesses, and instituting a new limit on recurring state spending from the state’s general fund. They also approved an increase in the state sales tax from 4.45% to 5%, which, if you’ve paid any attention to social media, has obviously left some people frustrated and trying to make sense of how this aligns with fiscal responsibility. What gives?

Before the session, the average combined rate of state-local sales tax in Louisiana was 9.565%—the highest in the nation. The average local option sales tax rate was 5.11%. With the current state sales tax rate, combined local and state tax rates can reach up to 12%, pushing Louisiana further ahead of other states in combined state-local sales tax rates. Initially, the Governor’s proposal was to broaden the sales tax base—meaning the purchased items subject to the tax—in order to raise state revenue to make up for decreases in revenue associated with the proposed income tax reductions, as the administration sought to keep the overall tax plan revenue neutral instead of lowering planned spending. However, the Legislature balked after hearing from constituents, including business owners who didn’t want to impose a new tax on currently untaxed items and services.

Eventually, lawmakers settled on a slightly higher 5% state sales tax rate that would be levied on digital goods and services that were previously untaxed, slightly broadening the base and keeping constituents happy. Or so they thought.

Louisiana has ranked consistently near the very bottom of the Tax Foundation’s sales, use, and excise tax component of the State Tax Competitiveness Index, holding its position at #48 from 2020 to 2025. Sales taxes are generally considered by experts to be more equitable than other types of taxes, such as corporate income taxes and wealth taxes. Sales taxes are consumption-based, meaning taxpayers decide how much they choose to spend, which creates no disincentive to working, saving, or investing. Broad-based sales taxes prevent a heavy tax burden from falling on a specific group of taxpayers. This also allows base sales tax rates to be lowered while maintaining state revenue. Sales tax collection, when administration is centralized at the state level, is regarded by experts as a simple and efficient process.

Still, no one likes to be at the bottom of a list that ranks how well states structure any tax system, and no one likes the feeling of having to pay more for things than others. The good news is that Louisiana’s 5% state sales tax will remain in effect through December 31, 2029, with the rate set to drop to 4.75% on January 1, 2030. Governor Landry and several lawmakers have also commented that Louisiana’s recent fiscal reforms should be regarded as a first step, with more to come throughout the remainder of this and possibly the next term. With increased attention on government spending and efficiency (courtesy of Elon Musk’s DOGE and Governor Landry’s new Fiscal Responsibility Program announced shortly thereafter), combined with expected new economic activity and increased state revenues resulting from tax reform, Louisianans shouldn’t need a high state sales tax for much longer.

To accelerate this drop, lawmakers can continue looking for ways to broaden the base. They can also continue working to streamline the collection and administration of sales taxes to improve economic competitiveness. Continuing to lower—and eventually eliminate—income taxes will also boost Louisiana to the top of states for economic competitiveness, allowing the state to generate higher revenues at lower rates through a thriving economy. With government running smarter and practicing discipline and restraint, the cost of operations can be reined in and high tax rates won’t be needed to function. Louisianans will be able to enjoy greater economic freedom and prosperity.