(Sept. 29, the Advocate/Times-Picayune) If Louisianans are tired of finishing near the bottom of every rating of civic health, they should buy into major reforms.
In proposals within the last week, state Revenue Secretary Richard Nelson and the Pelican Institute think tank make good sense when pushing for a flatter, simpler, more growth-oriented tax system in Louisiana. Still, a little caution is in order.
On personal income taxes, Nelson proposes a flat rate of 3.8% on all income over $12,500. Pelican, in a paper to be released Monday, will propose a 3.5% rate. Nelson estimates the state would lose $500 million a year in revenue as a result of the reduced rates in his plan, but would make up for it largely by eliminating numerous targeted tax breaks and extending the sales tax to previously untaxed services. Pelican’s plan, on paper, would reduce revenues even more.
Both assume, though — Pelican more abundantly — that another large portion of the revenue loss on paper would be recouped through far more dynamic economic growth.
Pelican’s “fiscal reform” plan is comprehensive, calling for flattening not just personal income tax rates but also corporate income tax rates, along with eliminating the corporate franchise tax and the inventory tax. Noting that state spending has grown at twice the inflation rate for nearly a decade, Pelican also proposes an expenditure limit that would block state spending from rising faster each year than the inflation rate plus population growth.
Much more boldly, Pelican says both corporate and personal income taxes in Louisiana should be phased out, slowly but entirely. The think tank lays out an arithmetically cogent process for doing so.
To which, some observations are in order.
First, Pelican is right in noting that the dizzying complexity of Louisiana’s tax system, along with its imposition of outmoded, inefficient franchise and inventory taxes, “hampers entrepreneurship and family prosperity.” Louisiana increasingly is an outlier with its multi-tiered, multi-exemption system that causes compliance problems while retarding growth…. [The full column is at this link.]
