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Policy Group Says Tax Reform Would Boost Jobs in Louisiana 

Posted on May 5, 2020

Louisiana should simplify its tax code to help create jobs in the wake of the COVID-19 pandemic, according to a free-market policy group. 

In an April 30 report titled, "Get Louisiana Working Policy Solutions," the Pelican Institute for Public Policy lists tax reform among ways to jump-start Louisiana’s economy and create jobs. Lawmakers are slated to return to the capitol May 4 after temporarily adjourning in early March because of the virus.

In a related news release, institute CEO Daniel Erspamer noted that the state had a high unemployment rate before the pandemic, adding that the "current crisis facing the state makes the need for addressing" tax reform and other priorities outlined in the report "more urgent and critical than ever."

According to the report, "There is no more important time than now to pursue reforms that simplify our complicated, antiquated tax code. Just fixing the structure of our corporate and personal income tax codes would result in a roughly four percent growth in GDP and add at least 15,000 jobs.”

“Relieving individuals and businesses from a complicated and burdensome tax code would reduce headache, while also freeing up time for entrepreneurs and small businesses to focus on creating jobs and boosting the economy,” the report continues.

The report recommends that lawmakers replace the existing personal income tax with a 4 percent flat tax and “remove a myriad of deductions and credits.” It also calls on the state to simplify and flatten the corporate income tax rate to about 3 percent by “repealing the corporate deduction for federal taxes paid” and repealing targeted incentive programs; use revenue triggers to phase out the corporate rate; and repeal corporate franchise taxes.

The report argues that parishes’ authority to assess inventory taxes should be phased out because it represents an “ineffective way for parishes to raise revenue" and says that sales tax collections should be centralized for purposes of simplification.

Finally, the report argues that the severance tax on oil and gas should be lowered, eliminated, or redirected “to provide relief during the current oil price decline and COVID-19 crisis.”

However, according to Carl Davis of the Institute on Taxation and Economic Policy, the institute's proposals “would move Louisiana in exactly the opposite direction of where it needs to go.”

“Repeal of the corporate income tax and a steep cut to the state’s top personal income tax rate will provide a windfall to the people and companies that need it least. By definition, these policy changes will be most beneficial to taxpayers who are still managing to generate large incomes even during this economic upheaval. Those fortunate taxpayers should be asked to pay more, not less, toward supporting the public services and institutions that will help us weather this storm,” Davis told Tax Notes May 1.

According to Davis, “The single most important thing that states can do right now, from a tax perspective, is to raise rates on the wealthy in preparation for the enormous revenue shortfalls that are just around the corner. Without new revenues, teachers, first responders, and construction workers will lose their jobs, and Louisiana and the rest of the nation will slip deeper into recession.”

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