Pelican Institute plan calls for tax reform, spending limits

(The Center Square) − The Pelican Institute for Public Policy's reform plan focuses on reshaping Louisiana's fiscal approach to address its long-standing economic challenges.

Central to the proposal is the phased elimination of income taxes, including the elimination of the corporate franchise tax, and phasing out the personal and corporate income tax.

Tax reform alone won’t solve the problem, according to the Institute. The state must also adopt stricter spending controls to avoid the fiscal instability seen in other states like Kansas, where tax cuts without corresponding spending restraint led to budget deficits and eventual tax hikes.

In Louisiana, state spending has surged by 84% over the past decade, outpacing inflation by a factor of two despite a shrinking population and significant outmigration, according to the Institute.

Now, the state faces a $500-700 million budget deficit over the next three years and the Legislature has been scrambling to act, proposing a 5% across-the-board budget cut that critics say endangers programs and jobs in the Department of Child and Family Services, teacher stipends and pay raises along with public school funding.

To prevent further unchecked spending, the Institute is calling for a meaningful expenditure limit that ties state spending growth to population increases and inflation rates. Without such reforms, the Institute warns that any tax cuts could be undermined by budget shortfalls and future tax increases.

In addition to tax and spending reform, the Pelican Institute advocates for broader economic changes. These include simplifying Louisiana’s complex tax code — currently featuring progressive income taxes, a corporate franchise tax, and a local inventory tax — which the authors argue hinders entrepreneurship and business investment.

Department of Revenue Secretary Richard Nelson made similar suggestions in a recent hearing before House Ways and Means Committee. Nelson mentioned cutting or completely removing franchise and inventory taxes and noted that other states, like North Carolina and Arizona, have seen substantial growth in median incomes and population thanks to their recent tax reforms.

"Everyone in the South is continuously improving their tax policy," Nelson said. "If the state doesn't begin reforms we'll get left behind."

With a history of fiscal mismanagement, Louisiana has seen high outmigration rates and a decline in economic performance, according to the Institute.

The Pelican Institute believes that embracing these targeted reforms "would boost economic growth by over $2 billion, create 5,000 new jobs, increase business investment by $1.1 billion, and increase the purchase of goods and services by $600 million, all in just the first year."