Louisiana might have met revenue and tax collection thresholds that would trigger an across-the-board personal income tax cut at the beginning of 2026, but would worsen the state’s budget crisis over the next few years. Gov. Jeff Landry’s administration said Wednesday the projected state budget deficit for next fiscal year could grow another $100 million to $200 million if income tax rates automatically lower as a 2021 state law requires. The income tax rate reductions, if mandated, would bring the state’s estimated financial shortfall from $587 million next year to as much as $787 million, according to the state revenue department. This larger deficit would make budget cuts to higher education, disability services and public school teacher pay more likely. State budget holes would also deepen for years to come. Starting July 1, 2026, the impact of the income tax reduction would be a loss of $200 million to $400 million in state revenue per year. It would bring the projected budget shortfall for fiscal year 2027-28 to more than $1 billion. The income tax cut might come to fruition, but it isn’t a certainty yet. The 2021 state law provides for income tax decreases in January of 2026 if revenue collections and a state savings account balance reached certain levels as of June 30, 2024. Some preliminary estimates calculated last week indicate a portion of the triggers were likely met, but all the figures can’t be confirmed until after a review is completed in December. “We won’t know if the conditions for these triggers, inherited from the previous administration, are satisfied until the state finalizes its receipts from the prior fiscal year,” said James Lee, revenue department spokesman, in a written statement Wednesday. Rep. Julie Emerson, R-Carencro, said lawmakers are still waiting on information from the state Department of Treasury that will provide a clearer picture of whether the triggers are a factor. “It’s something that may happen. We’re watching it,” she said. Currently, individuals pay a 4.25% tax rate on income $50,000 and above, 3.5% on income between $12,500 and $50,000, and 1.85% rate on income less than $12,500. It’s not clear what the new rates would be if they were lowered. The Landry administration hasn’t provided that information. Still, the preemptive income tax cuts could complicate Landry’s ambitious plans to overhaul the state’s tax structure. Louisiana was already bracing for potentially drastic cuts to government services before the income tax reduction was in play. State officials warned last month that health care services for seniors, children and people with disabilities could be eliminated next fiscal year. Higher education leaders this week described the potential financial shortfalls they are being asked to prepare for as devastating for public universities and colleges. A $2,000 public school teacher yearly stipend is also vulnerable to being cut – and again, that becomes more likely if Landry and legislators have to cope with the significant revenue loss of an income tax reduction. “This just kind of gets piled onto the fiscal cliff,” said Steven Procopio, head of the Public Affairs Research Council of Louisiana, a nonprofit organization that studies the state’s tax and budget policies. “We already have a [budget] hole and we don’t have, as far as I know, a solution to that,” he said. Landry has been hoping to use the state’s existing budget challenges to usher in a tax system rewrite. In general, the governor wants to move to a single income tax rate, that would be lower for many households, in exchange for attaching the state’s sales tax to more services and products. This scheme is supposed to allow families to pay less in income taxes without the state seeing a large drop off in revenue that would cause enormous budget cuts, Revenue Secretary Richard Nelson said at a legislative hearing last week. People and companies would be turning over more in sales taxes instead. But this concept doesn’t align with the automatic income tax deduction that could happen in 2026. The automatic deduction would allow people to receive an income tax cut without legislative approval, and without having to trade it off for paying more sales taxes, as Nelson has proposed. It’s possible that Nelson, Landry and lawmakers could get out in front of the income tax cut trigger even if it were to move forward, however. “I think it does make the case to try and have tax reform sooner rather than later,” Procopio said. The governor is pitching a special legislative session on tax policy for November. The session would allow lawmakers to change the law around the income tax cut triggers before they take effect in a couple of months. Landry and the lawmakers could also put in place the governor’s proposed tax plan with a flat income tax rate if they desired. “The responsible thing would be to cancel these triggers and deal with the fiscal cliff,” said Jan Moller with the left-leaning think tank Invest in Louisiana. Moller’s organization opposed the automatic triggers when they were put in place in 2021 because he believed they would result in arbitrary budget cuts. “We did speak out about this in 2021 for the exact reason of what we see happening today,” he said. Some legislative leaders haven’t been convinced that a November special session on tax policy should move forward. Senators, in particular, have said they need more information about where the sales tax would be newly applied or what other tax breaks might be lifted. Landry has planned a press conference Tuesday, Oct. 1, to unveil more details about his tax plan. Senate President Cameron Henry, R-Metairie, said Wednesday that a potential income tax cut doesn’t take effect until 2026, and isn’t a reason to rush through a tax plan in November at this time. “We don’t know with certainty that the triggers will take effect. We get that information in December,” Henry said. Along with the personal income tax cut, Louisiana could hit triggers that cause the corporate franchise tax to automatically lower, but that cut is less of an immediate budget concern. The revenue loss from the franchise tax is earmarked for a state savings account, and lowering it wouldn’t directly exacerbate the deficit, officials said. Even without the income tax reduction, state residents are already expected to see another major tax break next year. In July, the state sales tax rate will automatically go from 4.45% to 4% thanks to a law passed in 2018. The reduction is estimated to cost the state $455 million in the next budget cycle.