Louisiana Small Business Tax Rates Incentivize Some, Penalize Others

Businesses in Louisiana pay widely different effective tax rates depending on which industry they’re in and how long they’ve been operating in the state, according to a new report from the Tax Foundation in collaboration with KPMG.

“Louisiana’s tax structure is characterized by high rates and partially offsetting incentives, particularly for new, but in some cases also for mature, firms,” reads the report.

The study accounts for all business taxes: corporate income taxes, property taxes, sales taxes, unemployment insurance taxes, capital stock taxes, inventory taxes, and gross receipts taxes. Additionally, each firm was modeled twice in each state: once as a new firm eligible for tax incentives and once as a mature firm not eligible for such incentives.

“Louisiana offers the lowest overall tax burden in the country to three new operations, due less to its overall tax structure than to unusually generous incentives programs,” the report says. “New capital- and labor-intensive manufacturing firms experience effective tax rates at or under 0.1% due to some of the most generous property tax incentives and withholding tax incentives in the nation.”

Louisiana is also tied with Utah for the second-most generous research and development tax credit, reducing the effective tax rate for the new R&D center to -10.3%, meaning that such businesses actually receive a substantial tax subsidy, the report notes. Mature R&D operations enjoy an effective tax rate of 1.8%, which is 85% below the median rate nationally.

“At the other end of the spectrum, the mature distribution center is saddled with an effective tax rate of 42.4%,” the report says. “The mature capital-intensive manufacturing operation’s tax burden is 85 times that of its new counterpart.”

Louisiana received the following rankings in the report for each business category analyzed:

  • 3rd lowest rate on research and development facilities, at 1.8%
  • 9th lowest rate on labor-intensive manufacturers, at 6.3%
  • 16th lowest rate on capital-intensive manufacturers, at 8.5%
  • 25th lowest rate on independent retail stores, at 15.4%
  • 26th lowest rate on call centers, at 19.6%
  • 27th lowest rate on corporate headquarters, at 13.7%
  • 34th lowest rate on distribution centers, at 31.6%

Read the full article which includes a download of the report.