Key Point: Louisiana’s labor market looks okay on the surface but the labor force is 16,613 (-0.8%) below the COVID-related shutdown in February 2020 and private sector employment is 35,900 (-2.3%) below then.
Labor Market: A job is the best path to prosperity as work brings dignity, hope, and purpose to people through life-long benefits of earning a living, gaining skills, and building social capital. The table below shows Louisiana’s labor market over time according to the U.S. business cycle until the latest data for October 2022 by the U.S. Bureau of Labor Statistics.
Data compare the following: 1) June 2009—Dated trough of that U.S. recession, 2) February 2020—Dated peak of the last U.S. expansion, 3) April 2020—Dated trough of the last U.S. recession, and 4) October 2022—Latest data available.
The payroll survey shows that net total nonfarm jobs in the state decreased by 4,200 jobs last month, bringing this to 60,600 jobs below the pre-shutdown level in February 2020. Private sector employment was down by 3,000 jobs and government employment declined by 1,200 jobs last month. Compared with a year ago, total employment was up by 52,100 (+2.8%) with the private sector adding 52,700 jobs (+3.4%) and the government cutting 600 jobs (-0.2%). The household survey finds that the civilian labor force declined by 6,035 last month and is down 16,613 since February 2020, which results in the labor force participation rate of 58.3% being 0.3-percent point lower than it was in February 2020 but well below June 2009 at the trough of the Great Recession. The employment-population ratio is 1-percentage point above where it was in February 2020, and the private sector employs 38,900 (-2.3%) fewer people than then. While the unemployment rate of 3.3% is substantially lower than the 5.2% rate in February 2020, a broader look at Louisiana’s labor market rather than this weak indicator shows that Louisianans still face challenges, especially compared with neighboring states.
Economic Growth: The U.S. Bureau of Economic Analysis (BEA) recently provided the real (inflation-adjusted) gross domestic product (GDP) for Louisiana and others states. The following table shows how U.S. and Louisiana economies performed since 2020. The steep declines were during the shutdowns in 2020 in response to the COVID-19 pandemic, which was when the labor market suffered most. The decline in real GDP annualized growth in Q2:2022 of 3% was the 5th worst in the nation. The BEA also reported that personal income in Louisiana grew at an annualized pace of 5.8% (19th best) in Q2:2022 (tied +5.8% U.S. average).
Bottom Line: Louisianans lost jobs in October and continue to feel the effects of the shutdowns in 2020 as many policies are too restrictive to allow more economic growth and prosperity with well-paid jobs. The Fraser Institute recently ranked Louisiana 20th for economic freedom based on 2020 data for government spending, taxes, and labor market regulation. And the Tax Foundation recently ranked the Pelican State as having the 12th worst business tax climate. White the state has improved its tax code recently and lower taxes may happen soon from an expected budget surplus, this lack of economic freedom and poor business tax climate are contributing to a net outmigration of Louisianans to other states over time, which is a drain on the state’s economic potential now and in the future. State and local policymakers should work to reverse this trend by passing pro-growth policies.
Recommendations: In 2023, the Louisiana Legislature should provide the state’s comeback story by:
Louisiana has many of the right characteristics for families to flourish. This includes abundant natural resources and thriving petrochemical, oil and gas, and tourism sectors. In fact, New Orleans was recently ranked as the 9th fastest-growing city for 2022 by the American Growth Project. They note that the worker shortages in New Orleans “could indicate the city has even more room to grow in coming years.”
But there’s substantial room for improvement as people and businesses are leaving the state. A big part of that is because of the poor state business tax climate that the Tax Foundation recently ranked as the 12th worst in the country. If it’s too costly to run a business, then employers and workers will go elsewhere.
This is especially true when it comes to personal income taxes. Louisiana should join the many states in the flat tax revolution to avoid the negative effects this tax has on people’s livelihoods.
This year, four states passed a flat personal income tax, making a soon-to-be total of 14 flat income tax states across the nation. One of them is Louisiana’s neighbor, Mississippi, currently ranked 30th in business tax climate. With a flat income tax, Mississippi's status will improve, but not as much as it could if it also eliminated the personal income tax altogether. Even the improvement of flattening income taxes won't support as much prosperity as eliminating them.
The nine states without personal income taxes, including nearby Texas and Florida, show better economic growth, domestic migration, and non-farm payroll employment when compared to flat-tax states. Uncoincidentally, Florida ranked 4th best and Texas 13th in business tax climate.
High personal income taxes contribute to Louisiana’s northern neighbor, Arkansas, ranking 40th in business tax climate, and the progressive darlings of California and New York ranking 48th and 49th, respectively. Personal income taxes in the business tax climate index rank 25th in Louisiana, 37th in Arkansas, 49th in California, and 50th in New York.
But the marks against Louisiana don't stop there.
The latest edition of the Rich States, Poor States report from the American Legislative Exchange Council, which notes the economic performance of the 50 states based on economic output, migration, and job creation from 2010 to 2020, reveals that Louisiana ranks last.
The report also compares the upcoming economic outlook for all the states across 15 policy variables, which put Louisiana at 20th, still behind Texas (11th) and Florida (8th), but above Mississippi (27th), although that will likely change in the next report given Mississippi's new flat tax policy.
What continues to show up as a contributing factor for Louisiana's lackluster tax policies and economic performance, when compared to its neighboring states, is a hefty burden of personal income taxes. People are fleeing states with high personal income taxes for good reason.
Progressive personal income taxes disincentivize work, as people's hard-earned money, that's already being devalued by the current 40-year high inflation, decreases even more. Naturally, people gravitate toward states where they can keep more of what they make.
What's a state to do for funding once personal income taxes are eliminated?
One poor answer to fund government spending is with higher property taxes. This is a weak spot to the overall tax system in some states without personal income taxes, like Texas, which are a result of excessive local government spending. The better answer that many no personal income tax states primarily depend on for funding is consumption-based taxes.
A flat final sales tax with the broadest base and lowest rate possible is best. Although taxing consumption results in less consumption, the benefit is that people save more, which allows for more capital and economic growth.
If Louisiana hopes to see more economic growth and thriving people in its state, like the recent growth in New Orleans, flattening personal income taxes should be a top priority until their ultimate elimination.
Originally published at The Center Square
Today, the Tax Foundation released the 2023 State Business Tax Climate Index. The report ranks all fifty states based on the collective burdens of each state’s corporate income tax, individual income tax, sales tax, unemployment insurance, and property tax.
The results show that spending restraint funded with low rate, broad-based taxes provide the best climate for business activity, which supports more jobs; and we all know that work helps provide people with dignity, purpose, and hope, along with the long-term self-sufficiency that is essential for families to flourish.
The Tax Foundation’s report notes what many entrepreneurs in Louisiana already know: the state’s business tax climate needs improving.
Figure 1 shows that this year the state ranks as the 12th worst among the 50 states, which is an improvement from the 8th worst ranking in the prior year, but still well below where it needs to be to support more in-migration, economic growth, and well-paying jobs. This year’s ranking is influenced by the corporate tax rank of 32nd, individual income tax rank of 25th, sales tax rank of 48th, property tax rank of 23rd, and unemployment insurance tax rank of 6th in the nation.
Compared with nearby states, Louisiana ranked ahead of Arkansas (40th), behind Mississippi (30th), and remained well-below neighboring Texas which improved from the previous report to 13th best in the nation.
The Texas model of relatively less government spending, no personal income tax, relatively low tax burden, and a sensible regulatory system have propelled it to substantial prosperity over time. This helped Texas diversify its economy from being as dependent on oil and gas activity as it was in the 1970’s and 1980’s. Still, Texas ranked behind the more fiscally conservative Florida (4th), who can provide an even better direction for where Louisiana should head if it wants more businesses to thrive in Louisiana.
The Tax Foundation’s report also provides caution of what not to do: don’t be like California (48th), New York (49th), or New Jersey (50th). These states have high government spending, high personal income taxes combined with other tax burdens, and a costly regulatory climate.
Given the upcoming 2023 session in Louisiana, the state legislature has an extraordinary opportunity to learn from the Tax Foundation’s report on how to improve. For Louisiana to provide greater opportunity for entrepreneurs and families to prosper, the business tax climate must improve by limiting spending, reforming and cutting taxes, and reducing regulatory burdens. Doing so will help more Louisianans live the American Dream.
Originally posted at Pelican Institute
Louisiana Economic Situation October 2022
Key Point: Louisiana’s labor market looks okay on the surface but the working-age population is 12,366 (-0.35%) below pre-shutdowns in February 2020 and private sector employment remains 35,900 (-2.2%) below then. Moreover, the decline in real GDP annualized growth in Q2:2022 of 3% was the 5th worst in the nation.
Labor Market: The best path to prosperity is a job, as work brings dignity, hope, and purpose to people by allowing them to earn a living, gain skills, and build social capital that endures. The table below shows Louisiana’s labor market over time according to the U.S. business cycle until the latest data for September 2022. Net total nonfarm jobs in the state increased by 5,000 last month, resulting in increases for 11 of the last 12 months but remains 56,900 jobs below the pre-shutdown level in February 2020 while the working-age population is down 12,366 since then. Compared with a year ago, total employment was up by 95,600 (+5.2%) with the private sector adding 98,100 jobs (+6.4%) and the government cutting 2,500 jobs (-0.8%). The labor force participation rate of 58.5% is 0.1-percentage point lower than it was in February 2020 but well below June 2009 at the trough of the Great Recession. The employment-population ratio is 1-percentage point below where it was in February 2020, and the private sector employs 35,900 (-2.2%) fewer people than then. Louisianans still face challenges given these latest figures for the labor market and remain well below the pre-shutdown trend.
Economic Growth: The U.S. Bureau of Economic Analysis (BEA) recently provided the real gross domestic product (GDP) for Louisiana and others states. The following tells the story of the U.S. and Louisiana economies over the last two and a half years. The steep decline was during the shutdowns in 2020 in response to the COVID-19 pandemic, which was when the labor market suffered. The decline in real GDP annualized growth in Q2:2022 of 3% was the 5th worst in the nation. The BEA also reported that personal income in Louisiana grew at an annualized pace of 5.8% (19th best) in Q2:2022 (tied +5.8% U.S. average).
Bottom Line: Louisianans continue to feel the effects of the shutdowns in 2020 and policies that are too restrictive in allowing more economic growth and prosperity with well-paid jobs. This has influenced a net outmigration of Louisianans to other states over time, which is a drain on the state’s economic potential now and in the future. State and local policymakers should work to reverse this trend by passing pro-growth policies following the Pelican Institute’s roadmap for a comeback story.
Recommendations: In 2023, the Louisiana Legislature should provide the state’s comeback story by:
Originally posted at Pelican Institute
NEW ORLEANS— The Pelican Institute for Public Policy, a New Orleans-based free market think tank, has announced the hiring of Dr. Vance Ginn and Jamie Tairov. Ginn will serve as the institute’s chief economist and Tairov as senior policy associate.
“I am thrilled to welcome Vance and Jamie to the Pelican team as we work to write Louisiana’s comeback story,” said Pelican CEO Daniel Erspamer. “The best talent in the country is required to accomplish bold change and ensure everyone in Louisiana has the opportunity to flourish. Vance and Jamie bring nationally recognized policy expertise, research excellence and a deep commitment to winning on behalf of Louisiana families to achieve our mission at this critical time of charting a new path for Louisiana.”
Ginn is a free-market economist. Before joining the Pelican Institute, he served as the chief economist at the Texas Public Policy Foundation and is currently policy director for the Alliance for Opportunity campaign, a multi-state poverty relief initiative featuring Louisiana, Texas and Georgia. In 2019 and 2020, he served as the associate director for economic policy of the Office of Management and Budget at the Executive Office of the U.S. President. He has contributed to The Wall Street Journal, Fox News, The Washington Post and National Review.
“I’m excited to join the fantastic team at the Pelican Institute and hit the ground running toward providing proven free-market policy solutions that let people prosper,” Ginn said. “There is a historic opportunity in Louisiana to work on budget restraint, tax reform and poverty relief. We want to remove barriers and unleash families in search of a bright future in Louisiana. By working toward limited government, there will be unlimited paths for families to achieve their hopes and dreams, and that is what I hope to foster with the team at the Pelican Institute for all Louisianans.”
Tairov will bring years of Louisiana policy and budgetary expertise to the Pelican Institute and will serve as senior policy associate. Before joining Pelican, she spent many years in various roles at Louisiana State University, where she completed a master’s in public administration. She then worked as a budget analyst for the fiscal division of the House of Representatives. At Pelican, she will be working to advance solutions in the areas of fiscal policy, social safety net, criminal justice and occupational licensure.
“I am so excited to join the Pelican Institute and work to advance proven policies that will give all Louisianans the opportunity to flourish,” Tairov said. “Through proven social safety net and criminal justice reforms, as well as changes to our state’s complex tax code and budgetary systems, we really can write Louisiana’s comeback story.”
Vance Ginn, Ph.D.