House Ways and Means committee to hear testimony on tax reform

By Nolan McKendry | The Center Square

The House Ways and Means committee will continue hearings on tax reform, this time in response to Gov. Jeff Landry’s tax reform proposals for personal income and sales taxes on Tuesday, with corporate income and franchise taxes also on the agenda if time permits.

Landry announced plans to convene a special session to reform the tax code with 10 bills, a tall order to fill in just two weeks. Landry hopes the reforms will help address the projected fiscal cliff, which could approach $1.5 billion dollars, according to Landry.

The committee will consider the implications, impact and possible backfire of Landry’s proposals. Landry’s administration has only released an outline to the public.

First, Landry’s plan is to reduce the current income tax rate and eventually eliminate it completely.

The plan also includes eliminating sales tax exemptions and expanding the sales tax to other services and digital goods. Key exemptions for groceries, utilities and the homestead exemption will remain unchanged.

The plan also proposes expanding the sales tax exemption for prescription drugs to local taxes. Additionally, Landry is pushing for a flat 3.5% corporate tax rate and a flat 3% individual income tax, while doubling the standard deduction for seniors.

One bill includes rewriting article seven of Louisiana’s constitution, which plays a key role in ensuring fiscal responsibility, by requiring the state to have a balanced budget, but can also constrain flexibility in dealing with fiscal crises or budget shortfalls.

The Ways and Means committee heard testimony last week which was overwhelmingly favorable to Landry’s proposals.

Former Rep. Scott Simon, R-Abita Springs, Manish Bhatt of the Tax Foundation, Jonathan Williams of the American Legislative Exchange Council all gave testimony favorable to Landry’s proposal.

Each echoed sentiments of simplifying the tax structure through a flat tax, phasing out the income tax and corporate franchise tax, and broadening taxed goods and services.

Executive Director of Invest in Louisiana Jan Moller told The Center Square that the appropriate time to address the shortfall is in next year’s legislative session. “The Legislature created this fiscal cliff,” Moller said, adding that temporary taxes have been used as “patchwork solutions for generations.”

“Every other year the Legislature has a shorter session that is dedicated, that is set aside specifically for working on fiscal policies. You can’t raise taxes during a non fiscal session. You can only do it every other year, raise taxes or work on tax policy in general,” Moller said.  “There’s no reason why this has to be done in a special session in November, during the holiday season, when people in Louisiana are used to focusing on anything and everything except the state Legislature.”