During the Louisiana State Legislature’s First Extraordinary Session of 2016, legislators brought down the hammer on some of society’s most prevalent vices – cigarettes and alcohol – by increasing taxes and reducing tax discounts. The state is facing dire budgetary circumstances, including a deficit that could approach $750 million in fiscal year 2017, according to some reports.
H.B. 14, which went into effect on April 1, 2016, increases the Louisiana cigarette tax by 22 cents per pack. This is particularly significant because it has not even been a full calendar year since Louisiana last increased the cigarette tax; that increase was a whopping 50 cents per pack.
Prior to the 2015 increase, Louisiana had the third lowest cigarette tax in the country at 36 cents per pack. Louisiana’s cigarette tax is now $1.08 per pack after this most recent legislation and still considerably lower than the U.S. median tax rate of $1.53 per pack, according to data from the Federation of Tax Administrators as of Jan. 1, 2016.
In addition to increasing the cigarette tax, Louisiana rolled back tax discounts available to tobacco dealers in H.B. 18. The Louisiana tax stamp discount for in-state dealers was reduced from 6 percent to 5 percent. The discount for out-of-state wholesale tobacco dealers is now firmly at 5 percent; under prior law their discount could be up to 6 percent. Also, the discount offered to tobacco dealers for timely and accurate filing of their tobacco returns was reduced from 6 percent to 5 percent.
The legislature also set its sights on alcoholic beverage taxes and discounts during the special session. H.B. 28 decreased the tax discounts for accurate reporting and remitting of the tax due. For low alcoholic-content beverages, the discount is now 1.5 percent of the tax due and for high alcoholic-content beverages, the discount is now 2.5 percent of the tax due. H.B. 27, which also went into effect on April 1, 2016, increased the excise taxes on every class of alcoholic beverage sold in Louisiana.
The tax on liquors was increased to 80 cents per liter, up from 66 cents. The tax on both sparkling wines and still wines with more than 24 percent alcohol by volume was increased to 55 cents per liter, up from 42 cents. The tax on low-alcohol content still wines was increased to 20 cents per liter, a considerable increase from 3 cents per liter; while the tax on still wines with between 14 and 24 percent alcohol by volume was increased to 35 cents per liter, also a considerable increase from 6 cents per liter. Finally, the tax on both beer and malt beverages was increased to $12.50 per barrel, from $10 per barrel.
Based on analysis completed by the Louisiana Legislative Fiscal Office, the increased cigarette tax will generate an additional $46 million in tax collections for fiscal year 2017 and $230 million over the next 5 years. Similarly, the increases in alcoholic beverage taxes are expected to generate an additional $19.2 million in revenue for fiscal year 2017 and an additional $97.4 million over the next 5 years.
While the projected increases in sin tax collections represent only a small percentage of Louisiana's expected budget deficit in 2017, it will be much-needed revenue for the cash-strapped state.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Will increasing taxes be enough to cure Louisiana’s budget pains?
With a free trial to Premier State Tax Library, practitioners have a single trusted resource that provides all of the tools and information they need to develop and implement the right tax strategies.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)