Louisiana revenues were down in the recently completed fiscal year as the state began phasing in a new tax regime.
The state's own-source revenues declined 2.3% in fiscal 2025 from fiscal 2024, according to Lucy Dadayan, principal research associate at the Urban-Brookings Tax Policy Center of The Urban Institute. Fiscal 2025 had $12.24 billion in revenue whereas fiscal 2024 had $12.53 billion.
The decline in revenue was primarily due to an 11.3% decline in corporate income tax revenues, according to Dadayan's data.
The revenue decline accelerated in the fiscal year's last quarter, April to June, when the state's revenues were down 2.6% according to preliminary data from Dadayan.
July 2025 revenues, the most recently available, were down even more, declining 3% from July 2024 revenues, Dadayan told The Bond Buyer.
Last fall, the
What had been a graduated individual income tax rate peaking at 4.25% was replaced with a flat 3% rate as of Jan.1. The state replaced a bracket based corporate tax system with a flat 5.5% rate with limits on corporate tax credits, deductions and other incentives.
This coming Jan. 1 a corporate excise tax will be repealed.
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.
Moody's said it expects Louisiana state revenues to remain flat through fiscal 2029.
The Louisiana Department of Revenue didn't respond to a request for a comment for this story.
"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."
S&P Global Ratings Associate Director Rob Market said the recent state revenue decline doesn't raise credit concerns about the state, rated AA by the agency.
"Corporate income taxes were indeed down; however, we have seen declines in corporate income taxes in many states and generally view these revenues as having elevated volatility," he said.
"Should total revenue fall behind forecasts, Louisiana's institutional framework empowers the governor to implement budget cuts quickly to maintain structural balance," Market said. "There is also a constitutional requirement to pass balanced budgets and a formalized budget-monitoring process, which should further support financial stability."
In the spring, the state Senate Revenue and Fiscal Affairs Committee
That was the correct choice, Neva Butkus, a Louisiana-based senior analyst at the Institute on Taxation and Economic Policy,
Not only are there signs of a recession forming, the GOP's new federal cuts to Medicaid and the Supplemental Nutrition Assistance Program "could devastate our state finances as Louisiana's state budget is more reliant on federal dollars than almost any other state," she wrote. The state has one of the highest poverty rates in the nation, she said.
"The Trump administration has already slashed 30% of the Federal Emergency Management Agency's staff and has talked about eliminating the agency altogether," Butkus wrote. "Louisianians can't bank on the federal government's assistance when we are inevitably hit with a major hurricane."
New Orleans may be the toughest city in America for real estate, University of Mississippi professor Ken H. Johnson
From the first quarter of 2024 to the first quarter of 2025, Louisiana had the smallest increase of housing prices of the 50 states, with housing prices increasing 1%, according to the Federal Housing Finance Agency.
"Shifts in housing stock and values tend to have a more pronounced impact on local governments than that of states," S&P's Market said. "To the extent that declining home values weigh on state economic fundamentals, it could have a credit impact on the state, however, management's response and adaptability remains key to preserving overall credit quality."
Krist was a bit more concerned about the decline in New Orleans real estate values, particularly over the last year.
"As for the state, the city still remains an important part, it is still a commercial and oil services hub and it still has a vibrant tourist industry. As long as that remains, I think the state will muddle through," he said.
In its March rating report, S&P said Louisiana, rated AA, benefits from sophisticated financial forecasting and capital planning that is based on realistic assumptions and that very high reserves can potentially be leveraged to offset potential revenue declines.
These factors are offset by the state's population loss and comparatively weak gross state product growth. The state is exposed to fluctuations in oil and gas prices.
"Louisiana's Gulf coastline exposes the state to extreme physical risks, including coastal flooding and tropical cyclones," S&P said.
The state's debt and liability profile is moderate, S&P said.
KBRA cited similar factors in reviewing the state's AA general obligation rating. It also noted the state's seasonally adjusted employment in December was 1.3% below the pre-pandemic level even as the United States employment level was 2.6% above that level.
On the other hand, "Efforts to restructure major taxes may yield increased economic competitiveness and growth over time," KBRA said.
Moody's, which rates Louisiana GOs Aa2, said in late August the state had the second highest exposure to trade disruption when states' export and import sectors are combined, primarily due to its large export sector. Kentucky has the greatest exposure, primarily due to imports being a high portion of its gross domestic product.
Fitch Ratings rates Louisiana AA-minus. All the rating agencies assign stable outlooks.
