(The Center Square) − Invest in Louisiana has issued a report warning against the tax reforms proposed by Gov. Jeff Landry’s administration.
Those reforms include a flat tax and an eventual phaseout of the income tax, which Landry hopes will address the budget deficit by creating jobs and economic growth.
“This plan seeks to attract investment, while protecting low income earners, our middle class, and our seniors,” Landry said. “A plan that will fix Louisiana to compete for new jobs, greater wages and produce a thriving economy in a new Industrial South.”
“In the past ten years, LA has lost population while states around it have grown. In the past decade, we have seen Louisiana’s ranking with the Tax Foundation get worse,” Landry said. “Our small businesses, our workers, and our citizens are paying the price for those statistics. For the past decade, our wage growth has been behind other states. Those statistics are a legacy of failure.”
Landry noted the various short-term fixes taken in years past — such as video poker or temporary sales taxes — have failed to address the “disease” of budget deficits that have long burdened Louisiana.
According to Invest in Louisiana, however, Landry’s plan could exacerbate the deficit and endanger the very programs and public services he hopes to protect from the shortfall’s wrath — most notably education and health care.
The Institute for Taxation and Economic Policy says the burden would be shifted to the middle class, especially if Landry’s plan does not adequately address the shortfall, which could prompt a hike in tax rates.
“The income-tax cut would cost the state more than $1.1 billion per year in lost revenue,” Invest in Louisiana wrote, citing data from the Institute on Taxation and Economic Policy. “The largest share of the tax cut would go to the top 1% of Louisiana income earners.”
To make up the lost income-tax revenue, Landry is proposing an increase of the amount of taxable goods and services, such as parking, ticket sales or short-term rentals.
For the bills to pass, there are many in the Legislature who still require convincing.
Landry has announced plans to convene a special session to rewrite article seven of Louisiana’s constitution on top of the nine “far reaching tax bills”. “That’s a lot to ask of a legislature to review and act on,” Jan Moller, the executive director of Invest in Louisiana, told The Center Square.
Senate President Cameron Henry said in an interview with The Advocate that “members still have significant questions about the policy decision he wants to make.”
That budget shortfall is expected to reach $700 million by 2027, though Landry said it could be close to $1.5 billion “based upon impending statutory revenue impacts.”
In 2023, the Louisiana Department of Revenue reported $4.6 billion in individual income tax revenue.
According to the Louisiana Division of Administration, “[T]he Individual Income Tax represents between 25% and 30% of the total collection of Taxes, Licenses and Fees. It has no significant dedications, and this means that it supports the State General Fund in a sizable share as well.”
The programs within the general fund which had the highest operating budgets in 2023 were the Louisiana Department of Health, higher education, and the Department of Education.
“This is not Washington, where you can put everything on the credit card and worry about it another time,” Moller said. “Because you have this balanced budget requirement, you have to make up the revenue somewhere else.”
