As a November to overhaul Louisiana's tax code becomes increasingly likely, tax policy advocates from all sides of the political spectrum lobbied legislators Thursday during a committee meeting at the Capitol.
“There are a lot of moving parts in our tax system, and they are a big part of why it is so complicated and ultimately difficult for businesses to be in compliance,” Jim Patterson, senior vice president of government relations for Louisiana Association of Business and Industry, told the House Ways and Means committee meeting.
LABI is the state chapter of both the U.S. Chamber of Commerce and the National Association of Manufacturers and advocates for business interests in Louisiana.
“We need to do away with taxes that don’t exist in other states,” Patterson said after the meeting, referring to the corporate franchise and inventory taxes. He also said Louisiana's corporate income tax is "the highest in the South."
The corporate franchise tax is essentially a tax levied on businesses operating in Louisiana. An inventory tax is a property tax on the value of a business's inventory.
After Gov. Jeff he is pushing lawmakers to convene in November to rewrite Louisiana’s tax code, LABI issued a statement saying, “If we want to compete with neighboring states, we must simplify and streamline Louisiana’s tangled tax code while eliminating our franchise and inventory taxes and centralizing our local sales tax collection system.”
Daniel Erspamer, CEO of the conservative think tank Pelican Institute, at Thursday’s meeting called Louisiana’s corporate tax structure “complex and punishing” and said the state needs a “low, flat” corporate income tax rate to attract businesses and investment, and it needs to ax the corporate franchise tax.
Personal income tax brackets should be eliminated, and personal income tax should eventually be thrown out altogether, said Erspamer, who described Pelican Institute as “Louisiana’s free-market think tank.”
“Getting to a flat tax and then using constrained growth in government to phase out the income tax over the next several years in a thoughtful, responsible way” is the path to policy that benefits families, he said.
State government needs to constrain spending to make tax reforms successful, Erspamer added.
A preliminary tax reform proposal Landry sent to lawmakers this week calls for a flat rate of 3% for personal income tax, and it calls for a flat rate of 3.5% for corporate income tax.
It also calls for eliminating the corporate franchise tax and making changes to the inventory tax.
Landry's proposal also suggests keeping on the books a 0.45% sales tax, which is currently temporary and set to expire at the end of June.
Steven Procopio, president of the Public Affairs Research Council, a nonpartisan public policy watchdog group, on Thursday also backed the ideas of lowering personal and corporate tax rates as well as eliminating the franchise tax and creating a centralized sales tax collection system.
But Procopio said Louisiana also needs to broaden its tax base and eliminate tax credits, deductions and exemptions, and he acknowledged changing the inventory tax would be “tricky.”
The lone progressive voice invited to address the tax committee Thursday was Jan Moller, president of the left-leaning advocacy organization Invest in Louisiana, which looks at how policy impacts low- and moderate-income families.
Moller, in contrast with others, said that Louisiana needs a progressive tax structure, meaning that those in lower income brackets pay lower tax rates than those in higher income brackets. Progressive taxation is a matter of fairness, he argued.
“Tax fairness means that the people and institutions that have the most means should actually pay the most both as a total amount but also as a percentage of their income,” Moller said.
“What is difficult about the income tax system is not that there are three rates. It’s determining your net taxable income,” he said.