Louisiana continues to slide in the Tax Foundation’s annual “State Business Tax Climate Index,” with the latest ranking placing the state at 41st overall, four spots below last year’s ranking of 37, for having one of the least competitive tax codes in the nation.
In the latest index released today, the Washington, D.C.-based nonprofit also ranks Louisiana worst in the nation for its sales tax—a distinction the state has held for years.
“Louisiana has had a difficult year on tax issues,” says Scott Drenkard, the Tax Foundation’s director of state projects. “An increase in the sales tax to the highest rate in the country, plus continuing struggles with a complex local sales tax system put Louisiana in the bottom 10 states for tax competitiveness.”
The Tax Foundation’s annual index measures how well a state’s tax code is structured. The foundation analyzes variables in five categories: corporate, individual income, sales, property and unemployment insurance.
A state’s ranking can rise or fall on the list based on reforms implemented in other states or due to its own actions, the foundation says. States are rewarded for transparency and neutral tax codes, and penalized for having tax codes that are burdensome, complex and economically harmful.
In the latest index, Louisiana also tumbled four spots in the unemployment insurance category, from No. 5 in 2015 to No. 9 this year. The state also fell in the property tax category, slipping two spots from No. 28 in 2015 to No. 30 this year.
Louisiana showed no improvement in the individual income tax category, maintaining the No. 27 spot on the list this year. One bright spot for the state, though, is that it moved up the list two spots in the corporate taxes category, from No. 38 in 2015 to No. 36 this year.
“We are hopeful that fundamental tax reform can be a common objective in the next legislative session, especially as a number of reform commissions start to make recommendations to the state legislature,” Drenkard says.
The Tax Foundation compiles an overall index score based on the category rankings, and this year Louisiana’s score is 4.39, down from 4.72 a year ago.
The top-ranked state for business tax climate is Wyoming, which has an index score of 7.76, while New Jersey is at the bottom of this year’s rankings with a 3.41 score.
