The special session on taxes and tax reform in Louisiana featured a discussion with Will Green, President and CEO of the Louisiana Association of Business and Industry. The session highlighted the state’s challenging tax climate and the need for comprehensive tax reform.
Secretary Nelson presented a detailed plan outlining Louisiana’s current tax rankings and the necessity for reform. Louisiana is one of 16 states with a franchise tax and one of 14 with an inventory tax, ranking around 40th in tax climate. Nelson warned that without action, the state’s ranking could drop further, exacerbating fiscal challenges. He emphasized the impending fiscal cliff, with $600-$700 million expected to fall off the books, leading to a significant shortfall.
Nelson proposed a comprehensive tax reform session in August, suggesting a review of Article 7 of the Constitution, which contains numerous tax provisions. This review could allow for more flexible budget balancing and potentially move some provisions to statute or the transition section, subject to voter approval. However, the legislature, having been in session for six months, was not comfortable with this proposal, especially given the timing in early August when many are preparing for the new school year.
The discussion also touched on the fiscal cliff, with $558 million set to expire in July 2025, including the .45% sales tax, business utilities exemption, and vehicle sales tax deduction. Balancing this with the state’s high combined sales tax rate, lack of a centralized sales tax collection system, and high corporate income tax rate presents a significant challenge.
Nelson aims to reduce personal and corporate income taxes, eliminate the franchise tax, and find creative solutions to offset the shortfall. However, legislators need specific plans and a clear understanding of the challenges to tackle these issues effectively. The centralized sales tax system, previously passed by the legislature but rejected by voters, remains a contentious issue.