When it comes to the disparaging of Louisiana’s out-of-date and inefficient tax code, which has been criticized by analysts of both the left and the right, coming in at 14th worst doesn’t sound so bad.
But it is, given that Louisiana not only has a larger number of poorer families than many states, and the latest measurement is of the disparities in taxes among various income groups.
The most recent critique of Louisiana’s tax code comes from the liberal Institute for Taxation and Economic Policy, which released its “Who Pays” report that breaks down the effective tax rates by each income group.
According to the study, Louisiana has the 14th most regressive tax code among the states.
Analyst Neva Butkus of the Louisiana Budget Project summarized the findings: “A Louisiana household in the bottom fifth of income earners, with an annual income of $17,100 or less, pays nearly 12 percent of that income in state and local taxes. A household earning in the top 20 percent, with an annual income of $91,500 or more, pays less than 8 percent of their income in state and local taxes.”
That is true even as Louisiana has a relatively high top rate of income tax — not California-high but still at 6 percent a higher formal rate than many states. Part of the problem is the number of big exemptions, aiding the higher-income taxpayer the most.
Louisiana’s “take” from income tax is third-lowest of the 41 states that tax wage income.
A larger problem, also decried by the more conservative-leaning Tax Foundation, is the high rate of sales tax and a poorly designed sales tax structure.
Louisiana’s sales tax system is just a fraction behind Tennessee for combined state and local levies at the cash register. It is also shot through with exemptions, and fails to capture revenues from services, one of the most important economic segments in a modern economy.
All this is enough to make the analysts cringe, from whatever the ideological point of view they approach the problem.
Unfortunately, the state of Louisiana appears to be in chronic gridlock over taxes and spending. On the right, there is a desire to protect those whose interests are served by the current bad system; on the left, there continue to be pressures for more spending, as many services that government provides in other states at the local level come from the State Capitol here.
After much fighting, Gov. John Bel Edwards this year could not get legislators to agree to anything better than a sales tax bill that will fund government for a few years. That comes at the expense of working families.
It’s a fine mess we’ve gotten ourselves into, particularly given the way that tax reform has worked in other states and even at the U.S. Capitol: trading lower overall rates (a win for conservatives) for a broader tax base through ending exemptions (a win for liberals).
That’s the formula that has worked many other places. But it hasn’t gained traction here.