Many of us who were born and raised in Louisiana or who have lived here for a number of years understand that our state tax code, specifically including that portion of it located in our State Constitution, needs some re-evaluation and updating to account for current and future fiscal realities. In connection with this, Gov. Jeff Landry highlights the coming 2025 fiscal “cliff” in which Louisiana will face a $500-$700 million deficit.
The question has always been, what is the best way to do tax reform?
Well, much as he stated he would during his campaign for governor, Gov. Landry has taken a first step to eliminate the state individual income tax to make Louisiana more competitive with our neighboring states like Texas and Florida that have no state income tax. He feels doing so would send a message that Louisiana is becoming increasingly tax “friendly” and more efficient with the taxes it does collect—which, of course, contributes nationally to our profile as being a pro-growth state. In fact, the Plan specifically states that it “seeks to attract new investment while protecting low-income earners, our middle class, and senior citizens.”
So, what does the Landry plan entail?
Some of the prominent items include going to a 3% flat tax rate, down from 4.25%, a $12,500 standard deduction for low and middle-income earners, reducing the corporate tax rate from 7.5% to 3.5%, increasing the deduction for seniors (65 years and up) from $6,000 to $12,000 a year, eliminating state sales taxes on prescription drugs, a permanent teacher pay raise and repealing the corporate franchise tax.
Wow! That would be quite a change. How would those tax revenues be replaced?
The services that would fall under the new sales tax plan include activities such as political lobbying, dog grooming, massages, car detailing, landscaping work, streaming services in our state, and numerous others. It would also likely require making permanent our “temporary” 0.45% state sales tax.
The reason I suggest that this tax reform proposal is worthy of our consideration (and I hope the governor will take on the permitting process in this state next) is because we have seen, time and again, at the federal level that tax reform (which prominently includes tax cutting!) does create jobs, spurs economic growth and attracts investment.
Pres Reagan and others have reminded us many times that “the power to tax is the power to destroy” and the more we tax something the less we will have of it. We must apply this commonsense advice to our own state tax structure. Some of the deductions and exemptions that riddle our State Constitution are decades old and may serve no need or have no real purpose any longer. Those constitutional dedications must be examined in light of Louisiana’s current needs.
In short, by reducing personal and corporate income taxes we protect families and small businesses—which are the economic backbone of this state—and we provide hope. We give our children the thought that perhaps in a better economic climate they would not need to leave Louisiana and go to Dallas or Atlanta for jobs. We know many of them want to stay here, where they are from, we just have to make it possible for them to do so. We already have the best people, best food and the most interesting culture in the world. Now, let’s develop an equally great business climate.
I close with two points:
1). I note that because several of the aforementioned proposals will require changes in our State Constitution, the voters will have to agree to them and most likely that voting opportunity will come in March of 2025. 2). I commend Governor Landry for taking this on. No matter how it turns out, and I’m certain there will be much debate and numerous amendments, the Governor’s plan puts a spotlight on our state tax structure and performs the equivalent of an audit. That is all for the good.
It is morally essential that government at every level impose the awesome tool of taxation—the power to remove from the pockets of American and Louisiana citizens under force of law their hard-earned monetary gains earned through blood, sweat and tears—with respect and with care, taking as little as possible and only as much as is necessary for essential government functions.
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