The 2017 legislative session is underway and the big question that looms over the entire proceeding is a pretty basic one: what are lawmakers going to do about tax reform? The answer that seems to be coming back is probably not much. That’s unfortunate.
This year was supposed to be the year the Legislature was going to step up and tackle comprehensive fiscal reform and begin to address some of our tax policies that have clearly gotten out of hand. In 2015 and 2016 lawmakers passed a series of temporary taxes, most of which will roll off the books on June 30, 2018. That will create another budget hole somewhere in the range of $1.3 billion.
None of that is any surprise. Everyone knew what they were doing. And no one was really enamored with the notion of raising an extra penny in state sales tax to give us the highest combined state and local sales tax rate in the land. But the taxes would be temporary and the Legislature would come back in 2017 and fix all of that. At least that was the plan.
Fast forward to today and the story seems to have changed. Yes, the governor introduced a tax plan before the session began, and yes, in the first week of the session a House committee poured over a slew of tax bills. But the sense you get from lawmakers – even those that truly want to see real reform – is that the legislative appetite for fixing our tax structure just isn’t there.
Why? Well, even though another fiscal cliff is looming, it doesn’t come for another year. You can always have another special session to deal with fiscal reform if you want to and if push comes to shove, you can renew all those temporary taxes and the budget will still be balanced. That’s the line you hear, but it’s not the one we need.
Sales taxes in much of Louisiana now stand at more than 10-percent. In some areas they’re pushing 11-percent and in one community its 12. In a poor state like Louisiana, that’s a terrible tax policy. On top of that, we have among the lowest tax burdens in the country by any measure. But our State Business Tax Climate is in the bottom ten according to the Tax Foundation.
How can we have a low tax burden and a bad tax climate? Because we have a flawed tax structure that is overly complicated, hard to navigate and no longer competitive with other states.
Can we fix it? Yes. North Carolina went through a major fiscal restructuring a few years ago. When they started their tax climate ranking was about where ours is today. Now it’s ranked number 11. It can be done and there are advantages to doing it, but we have to have the political will to get started.
Unfortunately, the jury is still out on that one.