While leaders of both major parties were either celebrating their victories or mourning their losses after the November 5 elections, billionaire Charles Koch racked up a big win in Louisiana when Republican Governor Jeff Landry convened a special session of the state legislature on November 6 — the very next day — to overhaul the state’s tax system.
Two local Koch-backed groups actively pressured the governor and legislators to pass a slate of bills reducing taxes on the wealthy and corporations: Americans for Prosperity–Louisiana (AFP–LA) and the Pelican Institute. Both groups pushed for the changes on social media and elsewhere, produced media ads, encouraged their members to write their legislators, and flooded mainstream media with the results of studies backing their arguments in favor of tax reform.
Two other national Koch-connected groups, State Policy Network (SPN) and American Legislative Exchange Council (ALEC), have supported similar tax campaigns in other states, and ALEC’s chief economist testified in favor of the tax overhaul.
Taken together, these components of Koch’s political machine — which integrates policy “think tanks,” an astroturf lobbying group, and a network of corporate-friendly legislators — were instrumental in ensuring the governor’s victory when the special session culminated in the almost unanimous passage of a lower corporate income tax, higher sales tax, and flat 3% personal income tax to replace Louisiana’s moderately progressive income tax.
Koch’s AFP–LA celebrated passage of the bills as “an important step in changing the state’s complex and burdensome tax code.”
“Step” is apparently the key word here, as Koch-backed groups have far more sweeping changes in mind over the next few years. In October, the Pelican Institute released a “fiscal reform” plan that calls for phasing out personal and corporate income taxes altogether and eliminating the corporate franchise tax.
The flat tax legislation was introduced by Republican state Representative Julie Emerson, who has been a member of ALEC, the group of right-wing legislators and corporate representatives who meet behind closed doors to write model bills that affect the environment, labor, social services, criminal justice, and other state programs. In 2018 Emerson received $1,000 in campaign funding from Koch Industries PAC.
ALEC has promoted a model bill since 2013 that would create a flat tax on personal and business income — and require a two-thirds supermajority vote by legislators to increase the rate. Thirteen states already have a flat tax, and the Koch network continues to push for the legislation in other states.
Previously, the personal income tax rate in Louisiana stood at 4.25% for people earning $50,000 or more, whereas now even the wealthiest residents of the state will pay the same as the poorest: 3%.
“Income tax is a mandate; you have to pay it,” said Emerson in explaining her sponsorship of the bill.. “You get punished for making more money.” She considers paying a higher state-mandated sales tax “a choice.”
The legislature also reduced the corporate income tax to 5.5% from 7.5%, while increasing the sales tax — which stood at 4% along with a temporary additional sales tax of .45% set to expire in 2025 — to 5%.
Largely funded by right-wing and corporate foundations, the Pelican Institute received more than $500,000 from Koch foundations between 2019 and 2021, as well as $900,000 from the Walton Family Foundation, controlled by the owners of Walmart.
Many of Pelican’s staff members, including its CEO Daniel Erspamer, previously worked for organizations founded by the Koch brothers and/or funded by the Koch Family Foundations, including AFP.
The Pelican Institute is an affiliate member of SPN, which gave $444,000 to the group between 2018 and 2022. SPN also funded its affiliates in the five states that passed a flat tax in the past four years.
SPN groups operate as the policy, communications, and litigation arm of ALEC, giving the cookie-cutter ALEC agenda a sheen of academic legitimacy and state-based support.
Real Consequences for the Most Vulnerable
After the legislature approved what opponents see as a “deeply regressive” tax package, Susan Bourgeois, who heads Louisiana Economic Development, proclaimed, “Louisiana just became a more attractive place to do business.”
But there is no evidence that cutting state taxes drives economic growth. Between 2021 and 2023, “26 states cut their personal and/or corporate income tax rates, and many of these states have little to show for it besides budget crises, struggles to fund public services, and threats of downgraded credit ratings,” according to the nonpartisan Institute on Taxation and Economic Policy (ITEP).
ITEP calculates that because of the higher sales tax and additional taxes on previously exempt items, under Louisiana’s flat income tax plan, the poorest 20% of households will pay 13% of their income in taxes, while those earning $225,000 to $522,000 will pay only only 8% and the wealthiest residents (with incomes above $552,000) will pay 5%.
In addition, the reduction in income taxes for higher earners will reduce state revenue that most likely won’t be fully offset by the increase in sales taxes. This is expected to result in substantial cuts to government-supported programs, the extent of which won’t be known until the governor introduces his budget next year.
Before the vote, Invest in Louisiana, a nonpartisan coalition of nonprofit organizations in the state, warned: “Unfortunately, the tax changes that head to the governor’s desk will likely produce fiscal instability and future budget shortfalls, and saddle low-income Louisianans with higher costs for everyday purchases.”
In 2021, almost all of of Louisiana’s GOP congressional delegation joined with the Koch-funded groups ALEC, SPN, and the Pelican Institute in opposing President Joe Biden’s American Rescue Plan Act, or ARPA, which provided $5.18 billion to the state for healthcare, social services, and water, sewer, and broadband infrastructure. The new state tax cut could never have been so large if it weren’t for the massive federal aid the state is receiving despite this opposition from Republican legislators and right-wing groups.
Landry is already preparing certain state departments for his 2025 budget. For instance, the Louisiana Department of Health is planning to cut $105 million from its proposed budget for next year. The department pays for services for the disabled, vulnerable children, and the elderly. Other departments are likely to propose similar cuts in services as the governor readies his 2025 budget.
In addition to being burdened by what ITEP considers the highest overall combined state and local sales tax in the nation, the poor in Louisiana will be disproportionately affected by cuts in governmental services. The state already has the second highest poverty rate in the country, with 26% of children living in households with incomes below the federal poverty level. The obvious fact that the flat tax will only worsen income inequality in Louisiana appeared to be of no concern to the Koch groups or legislators.
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