The nonprofit Tax Foundation says changes made to improve Louisiana’s tax code by lawmakers during the special session will move the Bayou State out of the bottom in their rankings for tax codes. Senior policy analyst at the Tax Foundation, Manish Batt, says the tax reform package waiting for the governor’s signature should improve the state’s Business climate.
“Not just for businesses, but also just a climate for Louisianians, the ability to not just recruit the people to come to this state, but also retain the great talent that you already have,” Batt said.
Batt says based on the changes made, Louisiana’s tax code will rank in the middle of the pack compared to other states. He says the bill to lower the personal income tax rate to a flat three-percent rate from the current three-tiered rate is good policy and other states are also doing.
“When you have multiple brackets in an income tax code and you don’t adjust them for inflation they push people to one bracket to another unnecessarily,” Batt said. “Going to a flat tax structure, it eliminates that problem.”
In order to pay for the cut to income taxes, the legislators raised the state sales tax to five-percent, giving Louisiana the highest or one of the highest sales tax rates in the country. But Batt says legislators can do more reform to the soften the higher sales tax hit.
“There’s an opportunity to make significant reforms to the sales tax that were not able to make it out the Legislature during the special session, but our ripe for discussion in future years,” Batt said.
The Tax Foundation likes what legislators accomplished in the tax reform special session. State Representative Mandie Landry, a Democrat from New Orleans, remains pessimistic the changes will lead to business growth.
“If we cut corporate income taxes they will come, but who is going to come, when will they come, have they told you?” Landry said. “I have seen this for five years now that there are promises if we do this that and the other, we will be more business friendly and it hasn’t happened,” Landry said.
Governor Landry lauds the tax reform package as a tax cut for Louisiana residents, but Landry says a reduction to personal income taxes, combined with a higher sales tax, is a wash for most taxpayers.
For people under $100,000, the most you might see (in tax savings) is several hundred dollars, if you make $40,000, it’s like $200 and what has been conveniently left out of this conversation is that sales taxes are going up,” Landry.
While the income tax rate will go down starting January 1st, the state sales tax will go up to 5-cents at the start of the new year.
If this is a, good or bad move, or ,the right or wrong, will be seen in the future. But one thing is for sure. Some kind of changes must be made and if they’re wrong/not right, they must be changed again with the information collected from these moves. But to do nothing hoping for a different outcome is THE WRONG MOVE without a doubt.