(May 15) The homestead exemption may be politically sacrosanct in Louisiana, but that is no good reason to make it even bigger.
The state House Ways and Means Committee has advanced legislation to allow parishes to raise the exemption to cover the first $125,000 of a home’s value, up from the current $75,000. House Bill 271 by Rep. Matthew Willard, D-New Orleans, is well-intentioned but woefully wrongheaded.
The bill is misguided because it would throw even further out of balance Louisiana’s tax system, which (state and local combined) already relies far too much on sales taxes and far too little, comparatively, on property taxes. An unbalanced system leads to revenue instability for all levels of government, to competitive disadvantages vis-à-vis other states and, in Louisiana’s case, to a “regressive” system that taxes a higher percentage of the income of poorer people than of richer ones.
Research also shows that sales taxes are marginally more deterrent to economic growth than property taxes and, unlike property taxes, they can’t very easily be deducted from federal income taxes.
Yet Louisiana consumers already pay the highest base sales tax in the nation (albeit with some exemptions). With the state just having cut its income tax rate last year while hiking the sales tax, a diminution of property tax revenue would put even more pressure on regressive sales taxes to carry the load.
Moreover, even the current homestead exemption level gives Louisiana homeowners a break bigger than 46 other states provide. Numerous states offer no homestead exemptions at all, and the ones that do so usually restrict them to benefit only selected groups such as veterans, the elderly or people with markedly low household incomes. Only Arizona and Indiana feature bigger universal homestead exemptions than Louisiana, while Illinois offers a sliding scale. Mississippi offers an exemption on the same $75,000 of value, but it caps the benefit at $300 total tax savings…. (The full column is at this link.)
