Louisiana lawmakers ponder tax code changes to boost state's economy

(The Center Square) – Louisiana lawmakers held a hearing this week to discuss possible changes to the state's tax code, a task made more urgent by a recent report that ranked the state near the bottom for its business climate.

The Joint Ways & Means Committee held a hearing on Thursday to discuss possible changes to the state's tax code, one of Gov. Jeff Landry's most important policy goals.

CNBC ranked the top states for business and Louisiana was in 47th, the second worst regionally behind Mississippi (49th). Texas was third and Arkansas was 45th.

Georgia was ranked fourth, followed by Florida in fifth, with Tennessee eighth and Alabama 20th.

"Today, CNBC ranked Louisiana 47th in the country for business," Landry said in a post on X. "This is unacceptable and NOW is the time for change! In order to bring Louisiana from the bottom to the top, we must simplify and refresh our tax structure."

Louisiana Secretary of Revenue Richard Nelson briefed lawmakers on the present state of the tax code and possible changes, some of which would likely require a constitutional amendment. Those include sales tax exemptions for food, prescription drugs, utilities and fuel.

He also discussed how changes to the tax code could help solve the state's looming financial cliff next year when a temporary 0.45% sales tax sunsets.

Lawmakers could return to the capitol for a special session in August to address the fiscal cliff and possible tax code changes.

"I say all of the time that Louisiana really got a royal flush as far as resources," Nelson told the committee. "We've got the Mississippi River, we've got oil and gas, we've got agriculture, we've got tourism, we've got all of these things that most states would kill for, but at the same time, we've really had bad policy for almost as long as we've had great resources.

"As long as we use those resources as a crutch on bad policy, instead of a competitive advantage, we're going to continue to see what we've seen with Louisiana on the bottom of these lists."

At present, Louisiana has the nation's highest sales tax rate at 9.56% and is one of only three states to have a corporate franchise tax in addition to a corporate income and inventory levies.

That corporate income tax rate, Nelson said, is the highest in the South, and higher than the rate in New York.

Louisiana has had five consecutive years of population loss. Since 2016, 120,000 people have left the Pelican State, equivalent to the population of Lafayette or 13 of the state's smallest parishes. From 2020 to 2023, 84,000 people have emigrated from Louisiana, equivalent to the population of Lake Charles.

Nelson recommends reducing the state's individual income tax rates to a single, flat rate, much as Mississippi has done recently. He also proposed an increase in the standard deduction.

For the sales tax, Nelson recommended that lawmakers eliminate and consolidate exemptions and exclusions while expanding the tax base to services and digital goods. All of this would be done while reducing the overall rate.

He also proposed reducing the state's corporate income tax rate and eliminating the corporate franchise tax, along with reforms to the inventory and severance levies.