Louisiana’s lawmakers are being urged to make sweeping changes to the state’s sales, personal income and property tax policies, in an effort to end state government’s boom-and-bust budgeting cycles.
A 13-member study group of economists, tax experts and other policy leaders, created by state lawmakers, released its proposals today after months of work. As The Associated Press reports, the ideas will form the basis of a planned tax overhaul debate in the 2017 legislative session.
The proposals, “if adopted as a comprehensive set of reforms, will help to establish a long-term, stable foundation for Louisiana’s finances,” Revenue Secretary Kimberly Robinson and LSU economist Jim Richardson, co-chairs of the task force, wrote to legislative leaders.
The pair wrote that they believe the recommendations would provide sufficient money to run state government while also being “fair, easy to comply with and competitive with other states.”
The recommendations would lower tax rates, broaden what items are subject to taxes and reduce the number of complicated state tax breaks.
The task force suggests ending the 1% state sales tax hike temporarily enacted by lawmakers earlier this year and keeping the rate at a maximum of 4%.
To make up for the lost revenue, the group recommends sweeping in more items to sales tax charges. For example, it wants to end a tax break for business utilities and suggests the sales tax should be expanded to cover services such as cable television, web hosting and security services.
Also proposed is a uniform system of sales tax collections across Louisiana, rather than parish-by-parish tax administration. Also recommended is elimination of the corporate franchise tax.
One of the more contentious suggestions involves a 10-year phase-out of the local property taxes charged on business inventory, which would siphon away a sizable source of tax income for municipal governments.
The task force also recommends a five-year elimination of the tax credit given to businesses for the inventory taxes they pay, which costs the state hundreds of millions annually. The group offers several options for local government agencies to replace the lost tax money, like higher property tax charges to homeowners.
In a statement, the Louisiana Association of Business and Industry commended the task force for making suggestions such as unified tax collection and the eventual phase-out or reform of the franchise tax, among other suggestions. Still, some elements of the task force’s report—a permanent tax on business utilities and constitutional changes to the Industrial Property Tax Exemption program—require additional vetting and debate, LABI says.