Taxpayers in many states, year after year, tell pollsters that their state income taxes are too high and hurt their state’s ability to compete for jobs and opportunities. But little or nothing changes.
In Louisiana, however, voters will have an opportunity this Saturday, November 13, 2021 to put themselves in control and begin to drive down their high personal state income taxes. Imagine actual citizens, not politicians in Washington or Baton Rouge, empowered to reduce their own tax burden and that of their children.
How? If you are a citizen of Louisiana, you can vote for Amendment 2, formally known as the “Reduction of the Maximum Individual Income Tax Rate Measure.”
If Amendment 2 passes, it would result in lower income tax rates and implement an automatic trigger that would further reduce income tax rates as the economy grows.
Under the status quo, Louisiana’s tax structure is not competitive. Its top marginal individual income tax rate – the tax rate that drives investment decisions – is 6%. That is higher than Massachusetts and Illinois. Heck, young students in Louisiana deciding where to work can now choose from many states with lower tax burdens.
Eight states do not impose individual income taxes of any kind, including Louisiana’s neighbors Texas, Tennessee, and Florida. Adding insult to injury, a growing movement of states, including Louisiana’s neighbors Mississippi and Arkansas, are currently working to put their income taxes on the path to zero.
Unless Louisiana reforms its tax code, it will soon become an increasingly less attractive place to live, invest, and do business. Indeed, inaction will continue to cost residents of the Pelican State jobs and higher wages. But by voting for Amendment 2, Louisiana voters have the opportunity to get out in front of these challenges.
The first thing Amendment 2 would do is reduce the maximum allowable tax rate for Louisiana’s individual income tax from 6% to 4.75%. Capping the income tax rate at 4.75% would ensure Louisianans never face a rate that is higher, but thanks to the next reform included in Amendment 2, the rates could – and would – go lower.
The second reform included in Amendment 2 is the removal of all income tax rates from the Constitution, triggering a corresponding tax reform statute that would reduce every single one of Louisiana’s individual income tax rates. The current rates of 6%, 4%, and 2% would be replaced with lower rates of 4.25%, 3.5%, and 1.85%.
In addition to the immediate progress of lower, more competitive income tax rates, removing the income tax rates from the Constitution is also a big win over the long-term. When rates are set in the Constitution, they require a Constitutional amendment in order to be changed. While this would be a good thing if the income tax rate was zero, it makes reducing Louisiana’s high rates pretty difficult.
Removing the income tax rates from the Constitution would allow the legislature to reduce income tax rates with a simple majority, making it easier to deliver tax relief. At the same time, the Constitutional requirement of two-thirds support in both the state house and senate for tax increases would remain in place, meaning it would be difficult to increase income tax rates. Taxes would be easier to cut. Hard to increase.
Amendment 2 would also remove the present deductibility of federal income taxes from the Constitution. While this reform alone would result in a tax hike, the income tax rate reductions it is tied to ensure the tax reform package begins with a net tax cut for most taxpayers.
While that is great news, the bigger taxpayer wins will come from the next reform included in Amendment 2: the establishment of a trigger that would deliver automatic income tax relief in the future as the economy and revenues grow.
Under this provision, when tax revenues go up and certain criteria are met, income tax rates would be automatically reduced — permanently. Step by step, the revenue trigger could eventually take Louisiana’s income tax all the way to zero. Just like Texas, Tennessee, and Florida.
Many states, including Arizona, North Carolina, North Dakota, and West Virginia, have announced that they intend to phase out their state income tax. Passing Amendment 2 will put Louisiana in the forefront of those states, being among the first to be able to say current law has the income tax on the path to zero.
Businesses across America and the world will notice. And soon the moving vans that have been going to Dallas and Miami will increasingly also bring new jobs and opportunities to Louisiana.
Grover Norquist is president and founder of Americans for Tax Reform, a nonprofit taxpayer advocacy organization that was founded at the request of President Ronald Reagan.