LSU Manship School News Service
BATON ROUGE–As lawmakers battle over raising more revenue, it is worth keeping in mind that Louisiana residents pay some of the lowest state taxes in the country, tax and budget analysts say.
The Tax Foundation, an independent tax policy research organization, estimated this year that Louisiana and Alaska had the earliest “Tax Freedom Day” of any states–April 4.
That’s the date, the group says, by which the residents of a state have collectively earned enough money to cover all their federal, state and local taxes for the year, and it provides a rough measure for comparing the tax burdens among the states. New York residents did not hit their tax freedom day until May 14.
The foundation earlier did a more comprehensive study using 2012 data and found that Louisiana’s state and local tax burden was the sixth lowest in the nation as a share of total state income. Louisiana had relatively low property, individual income and corporate taxes.
“The state has a low total local and state tax burden compared to local income, but we have a very high sales tax,” said Jan Moller, executive director of the Louisiana Budget Project, a nonprofit group that monitors how public policy affects low- to moderate-income families.
The overall state tax level is important as legislators exchange increasingly sharp retorts about how much money to raise to fill a projected $648 million budget shortfall and how much to rely on cuts, mostly to high education and health care programs.
Moller said that a proposal in both the House and the Senate to extend a third of a cent of sales tax “would not be our first choice at tax reform. But since the Legislature refused to pass anything in 2017, I think it’s now our best hope at avoiding cuts that nobody wants.”
“Nobody wants to throw people out of nursing homes, tell college students they’re not going to get the scholarship they were promised or close hospitals,” he added.
The Republican-led House has passed bills that would raise about $400 million to replace some of the temporary revenue measures that expire this summer. One of the bills would extend one-third of a penny of sales tax that expires July 1.
Lance Harris, R-Alexandria and the leader of the Legislature’s Republican delegation, said his constituents would prefer cuts to further tax increases and want to cut the size of government.
A Senate committee on Wednesday agreed to extend the third of a cent of sales tax. It also voted to eliminate tax exemptions for industries to pump up the extra revenue to $642 million and stave off the cuts. The full Senate will debate those proposals on Friday.
Before the committee approved slashing the business exemptions, Harris warned: “I happen to believe that if this bill is drastically amended, in order to raise more revenue, the votes will not be there” when the House reconsiders it.
The House could take it up again over the weekend as both chambers rush to see if they can agree on revenue and spending bills before the special session ends on Monday.
Analysts say the state’s income tax level is relatively low as a result of the repeal a decade ago of the so-called Stelly Plan, which had been approved by former Republican Gov. Mike Foster in 2002.
The plan aimed to make the state’s tax system less regressive. It increased income tax rates for middle- and upper-income residents and eliminated a sales tax on food and residential utilities.
With federal reconstruction dollars after Hurricanes Katrina and Rita and surging oil prices, Gov. Kathleen Blanco, a Democrat, and her Republican successor, Bobby Jindal, had budget surpluses and wanted to return some of the money to taxpayers. Blanco started to roll back the Stelly Plan, and in his first year of office, Jindal completely repealed it.
Edwards, who voted as a state representative to repeal the Stelly plan, has said since he became governor that it would bring in $700 million to $1 billion in extra revenue if it were still in place.
Jindal also gave corporations hundreds of millions of dollars in tax breaks in hopes of attracting more businesses to the state. These incentives went to many industries, including natural gas, film and infrastructure. In 2012, the state exempted 88 percent of corporate income taxes, adding up to roughly $1.8 billion.
At the end of his tenure as governor, even Jindal acknowledged he had gone too far with corporate tax cuts. “The truth is, we have a system of corporate welfare,” Jindal said.
Proposals by the Senate Revenue and Fiscal Affairs Committee on Wednesday aimed to undo some of that so-called “system of corporate welfare” by repealing certain business tax exemptions.
The proposals represented an attempt to adjust the balance of Louisiana’s tax system by sticking more of a tax burden on corporations rather than individuals and place the House on the defensive if it prioritized the corporate tax breaks over cuts in health care and education.