Now that action has been taken with regard to the governor’s Commercial Activity Tax proposal, it is time to take the next step and move forward with other ideas, during this session, to address the fiscal issues that have troubled Louisiana over the last several years. Key to that is a tax structure that is fair, competitive, provides stability and removes uncertainty.
Toward that end there are a few points worth making:
- Louisiana has one of the lowest tax burdens in the country, yet according to the Tax Foundation our State Business Tax Climate is among the worst. Why? Because our low tax burden does not make up for what has become a more flawed tax structure. This hurts Louisiana’s competitiveness.
- Louisiana now has the highest combined state/local sales tax rate in the country. In many areas that tax exceeds 10% or more. Again, according to the Tax Foundation, this and other problems with our sales tax “put Louisiana in the bottom 10 states for tax competitiveness.”
- Earlier this year, Standard & Poor’s downgraded Louisiana’s bond rating and Moody’s offered a negative outlook. In doing so they cited “continuing risks regarding a fiscal cliff… and legislative reluctance to enact significant changes to the state’s revenue structure.” Fiscal uncertainty is hurting us.
- As a result, these downgrades are costing Louisiana millions of dollars in higher interest rates and aggravate our efforts to cut state spending. The financial adviser to the state Bond Commission recently indicated that bond sales earlier this year totaling $600 million will cost the state an additional $20 million as a result of credit downgrades. State Treasurer Ron Henson adds, “When you start dealing with temporary revenue measures, they (Wall Street) get nervous.”
So do those who are looking to invest in Louisiana. Industry leaders have made it very clear that the combination of fiscal instability and tax uncertainty are complicating their decisions about whether to invest in Louisiana at this time and other states are using the current situation to their economic advantage.
CABL served on the legislative task force that studied these issues and we believe the recommendations of that group still provide a framework for moving forward with a more permanent solution.
To be clear, for legislators there are two issues to consider: 1) how much revenue is appropriate for the state to collect, and 2) how we go about collecting that revenue. CABL is not advocating any specific dollar amount for the state to collect – that is a legislative decision.
We do suggest, however, that the way we are now collecting taxes through the nation’s most complicated sales tax rate and administration, a business tax structure that is out of alignment with neighboring states, and unnecessary complexities in our overall tax code put us at a competitive disadvantage that certainly comes at a price.
For these and other reasons we urge the Legislature to continue to work towards comprehensive fiscal reform this session that improves our tax structure and removes the uncertainty surrounding temporary taxes that is holding us back and costing us additional money. After nearly a decade of inertia on this issue, it’s time to fix this problem and move on.