An in-depth look at the six proposed amendments to Louisiana’s constitution have been made available by the Public Affairs Research Council of Louisiana, which is an independent voice, offering solutions to public issues in Louisiana through accurate, objective research and focusing public attention on those solutions. PAR is a private, nonprofit research organization founded in 1950.
The first two amendments were addressed in Tuesday’s issue. Information on Amendments 5 and 6 will be published in the Thursday’s edition of the Minden Press-Herald.

The first two amendments were addressed in Tuesday’s issue. Information on Amendments 5 and 6 will be published in the Thursday’s edition of the Minden Press-Herald.

3. Eliminates Federal Income Tax Deduction For Corporations On State Tax Returns And Sets A Flat Rate Current Situation

Proposed change

The constitutional amendment and companion legislation would make a tradeoff: corporations would get a flat tax rate of 6.5% but give up the federal tax deduction. The main purposes of the change would be to establish a lower top tax rate for corporations in Louisiana and to partially delink state tax calculations from the federal tax system. The constitutional amendment would remove the state income tax deduction for federal income taxes paid. The amendment does not affect individuals and families filing their state income tax returns. It retains the federal tax deduction for those filing state income taxes as individuals. If approved by the voters, the amendment would become effective on January 1, 2017, and would apply to all tax years thereafter.

A vote for would

Eliminate the deduction for federal income taxes paid by corporations when calculating state income taxes while triggering a flat corporate tax rate of 6.5%.

A vote against would

Allow corporations to continue receiving a state income tax deduction for federal income taxes paid and allow the existing corporate tax rates and brackets to remain.

Argument for

A core principle of tax reform is to broaden the tax base by having fewer deductions and exemptions, while lowering the rates. This amendment eliminates one of the biggest corporate income tax deductions while lowering the top rate. As one of just three states that offer a full federal corporate income tax deduction, eliminating the deduction would bring the state in line with standards observed around the country. The state’s highest tax rate is currently 8%. That rate is higher than most other states, particularly in the southeast and central regions. Dropping the rate to 6.5% would make the state more competitive at the national level. While 27 other states use a corporate flat tax, just six (Montana, Utah, South Carolina, Florida, Arizona, and Colorado) would have lower rates than Louisiana after adoption of the amendment. The elimination of lower tax brackets and rates may mean some larger corporations would enjoy a tax break at the expense of some smaller corporations. However, most small business owners would continue to avoid the tax altogether as a large majority organize as limited liability companies (LLCs) and report business income as individual income instead. Eliminating this deduction also distances our corporate tax system from the federal system. Under the current system, if federal taxes increase, businesses can take larger state income deductions. Thus, state revenue could decline because of actions outside of the state’s control. Conversely, if federal taxes decrease, state revenue would grow, leading to government expansion. Repealing the deduction would reduce the influence of national politics on state finances, help stabilize revenue streams, and restore power over tax rates to Baton Rouge.
Argument against

Few understand the real impacts of the proposed amendment on the Louisiana business  climate. No action should be taken to raise taxes on those corporations making relatively less income currently and thus being taxed at the 4%, 5% and 6% levels. Some of these businesses do not have the luxury of building up large net operating losses to later claim against their taxes. Also, the amendment serves no purpose in either increasing or decreasing state revenue in any substantial direction. The timing of the proposal is poor and should be reconsidered at a later time, if at all. This should be brought as part of an overall package that includes personal income tax and sales tax reforms. While estimates are difficult to make because of the volatile nature of corporate income tax, this bill would increase taxes on some corporations. Elimination of the federal income tax deduction for individual filers, many of which are LLCs and other business entities, was originally part of this initiative but the Legislature left that part out.

4. Property tax exemption for surviving spouses of persons killed in the line of duty current situation

The state constitution currently allows all citizens an exemption from most parish property taxes up to $75,000 of the value of the homestead if they reside in the home. It also allows most surviving spouses of deceased veterans with a service-connected disability rating of 100% unemployability or disability to receive a homestead exemption of $150,000 on their property taxes. The Constitution also prevents parishes and other taxing bodies from imposing additional taxes on surviving spouses to make up the losses from the exemption.
Proposed change

The proposed amendment adds another exemption to the state constitution for a surviving spouse of a person who died while on active duty. It applies in cases of death by members of the U.S. armed forces or the Louisiana National Guard or while performing their duties as a state police, law enforcement or fire protection officer. The spouse would receive a 100% exemption on the full assessed value of the home.

A vote for would

Give surviving spouses of military, fire protection officers and law enforcement personnel who died while on duty a full property tax exemption on their home.

A vote against would

Leave existing ad valorem property tax exemption levels and eligibility requirements in place.

Argument for

This amendment is a good gesture of support towards widows and widowers with spouses that have paid the ultimate sacrifice to protect our country and local communities. Surviving family members may also have a difficult time making ends meet after losing a substantial portion of the household’s annual income. The impact on local taxing bodies would be minimal as the population of eligible recipients is small.

Argument against

Although this expansion of the homestead exemption is relatively minor, the combination of this and other special homestead exemptions has a large impact on the local revenue base. While no single exemption is a significant problem, the trend toward creating more of these exceptions adds up to a negative impact and should be stopped.