The Governor’s plan for a grand Tax Reshuffle in Louisiana arose a few weeks ago.  Much has been proposed in the “Louisiana Forward Plan, but much is hidden, and most of the effects on Louisiana’s economy are largely unknown.  As discussed below, there are a multitude of changes, that result in little or no economic growth.  We must remember curing economic stagnation and reversing out-migration is the exclusive goal when considering changes in Louisiana’s taxation system.

With a special session on our horizon, neither the legislature, nor the taxpayer has reliable analysis that confirms that the Tax Reshuffle is a tax increase or reduction.  Most importantly, there is no one in the administration even suggesting how this particular, multifaceted plan will generate economic growth or population growth.  The administration is reminded that this Tax Reshuffle will fail if it is not laser-focused on economic growth and population growth.  Passage of the plan will only occur with reliable economic growth projections, showing a high probability of future success.  This plan includes sales tax increases and double income taxation. In contrast, the Legislators have promised their voters no new taxes.

At this stage – three weeks out from the call of the anticipated Special Session – a public understanding is emerging on this Tax Reshuffle.  Presently, the detailed proposals can be grouped into two different categories. The first category groups the changes that will affect taxes paid by consumer and small businesses.  I call this first category the “Individual Taxpayer Category.”  This category includes cumulatively the proposed changes to taxation of individuals, employees, small businesses, independent service providers, and digital service providers.  The second category is the “Corporate Taxpayer Category.”  This category includes the many changes to taxation affecting generally larger operations, with substantial business facilities, equipment and inventory.

By analyzing the Tax Reshuffle with these two categories, the public can see the offsetting net effects that the many individual changes have on these similarly-situated taxpayer groups.  Ironically, the most minutia-laden, complex and confusing part of the Tax Reshuffle targets the wallet of our Individual Taxpayers.  There are increases in income taxpayers, elimination of income exemptions, increases in sales tax rates, and double income/sales taxation on certain service providers and digital service providers.  Then, these increases are offset with a decrease in the applicable income tax rate.  A serious problem with these proposed changes is that it creates mountain-high compliance costs on Louisiana’s small businesses, both in paying the tax and collecting the tax.  Apparently, simplicity in tax policy has been abandoned.

So what is the net-net result on the Individual taxpayer?  If RESET’s analysis (a group of non-profit business lobbies) is correct, the Tax Reshuffle is a net-net nothing.  The Sales Tax rate increase, and the double income tax on individual services, taxation of digital services, and the reduced income tax rates amount to “ . . . little or no change from the current system.”  The “Louisiana Forward Plan” might better be described as the first “Rube Goldberg Tax Increase,” accomplishing nothing, in a most complex irrational way.  Rube Goldberg would be proud to be a co-author of such a proposal.  I hope no legislator signs up.

In contrast to the Individual Taxpayer Category, the Corporate Taxpayer is the beneficiary of substantial tax relief in the proposed plan.  The Rube Goldberg Tax Reshuffle includes the phase-out of the Franchise Tax, and the substantial reduction in the Corporate Income Tax rate.  To offset this reduced revenue to the State, the Reshuffle Plan includes phasing out certain corporate friendly spending programs.  These tax burden reductions are meaningful, will immediately make Louisiana-based interstate operations much more competitive.  This competitiveness may generate more jobs, cause more employees to move back, and cumulatively generate more economic growth.  The Governor touts the economic success in North Carolina, as proof this corporate incentive package will address out-migration.  Unfortunately, North Carolina’s approach generated (or at least was followed by) economic growth over a fifteen-year period.  I for one, believe this corporate incentive strategy ignores the current economic strategy that is presently moving people out of States and into other southern States.  This is a weak, unproven economic solution to Louisiana’s decade long out-migration woes.

Instead, substantial, direct income tax reductions for the individual taxpayer and small business owner is the proven remedy for curing economic stagnation and population out-migration.  We can ask Texas, Florida and Tennessee.  A three-year phase out of Louisiana’s Individual Income Tax would be a proven remedy.  As a taxpayer, call your legislator and tell him to reject the administrations “Rube Goldberg Taxation Plan” and instead follow the proven, simple and direct path to economic prosperity.

Repeal Individual Income Taxes” now over three years.  Even with the retention of the 0.45% Sales Tax paired with the three-year phase out, our Legislature promises Louisiana a competitive future.  Real Tax Relief with Tax Reduction is what is needed for Louisiana to grow and prosper.  Leave the Goldberg Tax Reshuffle Plan in the comics.

Paul L. Hurd, President
Louisiana Excellence, Inc., Contact paul@louisianaexcel.org
A non-profit dedicated to Louisiana Prosperity through lower tax burdens.