The Tax Foundation has completed an exhaustive study of the tax structure of Louisiana and produced a book which is meant to guide the State in achieving the goal of true fiscal reform. The Tax Foundation’s team of tax economists met with stakeholders from all walks of Louisiana life, including small business owners, local government officials, trade associations, industry representatives, state officials across the political spectrum, and ordinary taxpayers. They also reviewed the history of the fiscal system, previous tax reform studies, and historical revenue and economic trends.The book is designed to provide useful information and observations for Louisiana policymakers, journalists, and citizens as they evaluate the stateâ€™s fiscal system. It is a long read – over 100 pages – but given the dire situation with our State’s finances, it is important that citizens take the time to get informed about our current fiscal situation, how we got here and what we need to do to return to fiscal stability.
During their research for this book, several themes arose:
- Louisiana needs a tax structure that mitigates the volatility of the economy and current fiscal system, providing revenues that grow with the economy. The state economy is diversifying, and the tax system needs to reflect this new environmentâ€”something that the current tax code does not.
- The Louisiana fiscal system faces a long term structural deficit. Any changes to the tax code need to address this reality so that the state no longer requires short-term, temporary fixes to plug unexpected budget shortfalls each year. Louisiana lawmakers, both state and local, require an increased degree of flexibility in raising revenue and cutting costs. For example, state legislators are limited by the high level of dedications in the stateâ€™s fiscal system, while local officials are hindered as a result of strict state-imposed limitations on raising revenue. These problems and their implications deserve thoughtful deliberation.
- Louisiana’s fiscal system desperately needs administrative improvement. In particular, lawmakers should consider removing multiple duplicative tax regimes by unifying state and local sales tax collections, tax administration, and tax bases under an independent, state-local commission. By doing so, the state would be able to take advantage of increased sales tax revenues collected on remote transactions when federal online sales tax legislation is inevitably passed.
- Most of the state’s taxes suffer from narrow bases. Some of this problem stems from the partial repeal of the Stelly Plan, but it has also been exacerbated by the generous use of tax incentive programs, the shifting nature of consumption from brick-and-mortar stores to online venues, and the failure of the sales tax to apply to services, which are a large and growing share of the American economy. While base expansion is a laudable goal, it should be done carefully to ensure economically detrimental changes are not enacted.
- Above all, the tax system should retain elements that ensure Louisiana improves its competitiveness in both the national and global arena.
The book begins by providing bckground on Louisianaâ€™s economy (Chapter 1) and on the overall fiscal system (Chapter 2). It then moves on to review each major tax, outline concerns, and propose alternatives (Chapters 3, 4, 5, and 6). Chapter 7 proposes some additional reform ideas that fall outside of these four major tax types.