Op-Ed: What Happens to Louisiana if it Doesn't Provide Tax Relief?

​If a state doesn’t provide tax relief, then it falls behind those that do. That’s simple competitiveness as taxes have consequences and influence families and employers’ decisions to move where they pay less in taxes. While true, it’s more pertinent now than ever given the extent of tax relief happening across the states during the flat tax revolution.

Patrick Gleason, vice president of state affairs at Americans for Tax Reform, recently said at a press conference, “We’ve gone from nine to 14 states with flat taxes. When you look at the states with a flat tax of zero — no income tax — or a flat tax above zero, we’re now at almost half the country that either has a zero income tax or a flat tax rate. This is really significant progress in just a few years.”

Louisiana ranks 25th in the country for its individual income taxes according to the Tax Foundation’s state business tax climate. It’s time for Louisiana to join the flat tax revolution or lose more people and businesses to other states. This is a pressing concern today as nearby states of Texas, Tennessee, and Florida have no personal income taxes and are leading the way in providing opportunities for people to flourish.

Income taxes reduce the incentive to work, save, and invest as each dollar of income is taken from checks before workers receive it. Progressive income taxes, like that in Louisiana with higher tax rates as incomes increase, disincentivize work and productivity even more as you lose more of your earned income as you earn more.

Clearly, progressive income taxes or just income taxes in general aren’t helpful to a family, business, or an economy and should ultimately be flattened then eliminated. These tax reforms must be accompanied with spending restraint to avoid running budget deficits, which are prohibited with the balanced budget requirement in the state, so the legislature may choose to cut spending or raise taxes.

Economic data comparisons show that the nine states without personal income taxes outperform, on average, the nine states with flat income taxes in economic growth, domestic migration, and non-farm payroll employment over the last decade. This is also true when comparing Louisiana with no income tax states, Texas and Florida, and the highest income taxes, California and New York.

There’s a once-in-a-generation opportunity this legislative session in Louisiana for lawmakers to increase the competitiveness of the state and fulfill the promise to taxpayers made in 2021 that they will provide tax relief when there’s enough revenue. There’s plenty of money available now.

Lawmakers should pass a Responsible Louisiana Budget that limits state appropriations to less than the rate of population growth plus inflation, pay down debt, and put extra money in the rainy day fund to hit the trigger for individual income and corporate franchise tax cuts. This would result in sizable tax cuts that Louisianans would feel in their daily lives through more money in their pocket, more jobs available, and more paths out of poverty.

There’s good progress in this direction so far this session but as the session is winding down there will need to be a focus on these priorities, especially hitting the revenue trigger for tax relief. If not, Louisiana will continue to fall behind nearby states which will mean more people and employers will move elsewhere. This is unacceptable and must be changed now to turn the tide of less opportunity and flourishing in the Pelican State.

Originally posted at Pelican Institute.