LABI calls for phaseout of personal income tax, higher local collections

The Louisiana Association of Business and Industry says the state’s personal income tax should be phased out.

In a strategic plan released today, the state business lobby does not suggest a timeline but says lawmakers should move to a single flat rate “with the goal of a complete repeal in the future.” 

The stated objective of the “LA23 Strategic Plan” is to position Louisiana “as an economic leader in the South by the year 2030.” The plan focuses on four areas:

  • Education and workforce development
  • Tax and business climate
  • Economic development
  • Safety and resiliency 

Ted Abernathy, a consultant who authored the main report for LABI, says other states have replaced income tax revenue with consumption or property taxes. Either path would be a challenge in Louisiana, as sales taxes already are high and lowering the state’s homestead exemption is politically difficult. 

LABI says lost state revenue could be replaced by higher local collections, capturing more revenue from out-of-state sales, and broadening the sales tax base to include digital goods and services. 

During this year’s legislative session, lawmakers shelved a proposal to eliminate income taxes amid concerns about the impact on public education, health care and the poor. 

LABI also wants to raise the state’s gasoline tax, which is among the lowest in the nation and hasn’t been increased in 30 years, to address “the ever-growing backlog of infrastructure projects.” The group proposes indexing the tax to inflation and exploring a fee system to ensure drivers of electric and hybrid vehicles pay their “fair share.” 

The plan also calls for replacing the current corporate income tax system, which has three brackets and tops out at 7.5%, with a low single rate. In general, Abernathy says, Louisiana should work toward a simpler, more predictable tax code. 

“If you’re a businessperson looking at a state and your tax code is hard to understand, that in and of itself is a problem,” he says. 

You can read more about the strategic plan in today’s Daily Report PM.