Lawmakers convene this week to begin writing the story of post-pandemic Louisiana. Will they embrace status-quo policies that led to a stagnant economy with people and jobs leaving the state? Or will they champion bold reforms to bring jobs and opportunity back to Louisiana?
Unfortunately, it’s an all-too-familiar experience for Louisianans to have to say goodbye to close friends, kids and grandkids as they seek quality jobs in other states that are thriving. Despite abundant natural resources, access to large ports and a major river, sporting opportunities that attract visitors by the hundreds of thousands, and a culture unrivaled anywhere in the world, Louisiana has languished while other states have grown and thrived.
Now, opportunity exists to reverse our fortunes and move Louisiana from laggard to leader with bold action. We’re living in unprecedented times, to say the least, and workers and jobs are more mobile than any time in history. That’s why tax policy is more critical than ever, and reform is so urgently required. When looking for new investment opportunities, entrepreneurs and families place a heavy emphasis on the predictability and simplicity of the tax framework of the states they’re considering. That’s why people are moving in droves from high-tax, high-regulation states like California, New York and Illinois to places like Texas, Tennessee, North Carolina and Florida.
Complexity is our sin. At last count, Louisiana’s current code features 432 pages dedicated to explaining corporate tax preferences alone. By comparison, that’s more than double the length of the King James Bible’s entire New Testament. We’ve also implemented a so-called progressive tax structure, while the states with the most growth have either flat, simple tax rates or no income tax at all. Further, a deduction for federal income taxes paid ties the state’s tax and budget policies directly to volatile national policy.
Successful reform efforts in North Carolina and other states have given us a reform roadmap. Since passing major reform starting in 2013, North Carolina’s economy has grown into one of the strongest in the nation, reversing high unemployment and stagnant family incomes to become a national leader in economic growth. Tennessee recently repealed its last remaining tax on personal income. Texas and Florida have been leaders in this regard for some time, while Mississippi is making strides toward elimination of its personal income tax. Families and entrepreneurs in those states that embrace more sensible tax policies are demonstrably better off than we are in job creation and economic growth.
Louisiana lawmakers have an opportunity to embrace common-sense, revenue-neutral reforms that create a dramatically simpler, fairer, and more predictable tax code that fosters significant quality job creation and economic growth. In fact, Pelican Institute research shows that simply fixing the structure of our corporate and personal income tax codes can help grow our GDP by roughly 4% and add at least 15,000 jobs to the state.
Louisiana’s economy was limping along even before the pandemic. The difficulties entrepreneurs and workers have faced in the last year make pursuing reforms that simplify our complicated, antiquated tax code more urgent. Working families in Louisiana need tax reform now, and if implemented fully, these reforms will level the playing field for everyone contributing tax dollars and reignite the potential of the state’s economy, leading to better quality of jobs.
Writing Louisiana’s comeback story starts with reform of a complex and punishing tax structure in favor of one that is fair, flat, simple and predictable.
Daniel Erspamer heads the Pelican Institute for Public Policy in New Orleans.