The old hands at the State Capitol have it figured, that tax reforms have been tried before and will be discussed and discussed, but nothing will be finally passed.
Same old this year?
We hope not, even if we’re not necessarily ready to sign on to the complex series of proposals to overhaul Louisiana’s pathetically out-of-date tax code.
But we also think that the smart money is underestimating the potential for significant tax changes in the current session.
The details, of course, are necessarily critical. And detail is not something that such a large body of politicos is very good at, usually.
What tax reform has going for it, this time, is both political and a matter of good policy.
The political calendar is favorable, in large part because this “fiscal” session is supposed to be focused on taxes and the budget. With a general session coming next year, and a statewide election year the next, this is probably the best shot that the current crop of legislators will have at making a real difference in tax policy.
As a policy matter, just about everybody is united around the concept that our tax system is today a mess. It taxes working-class families too heavily but at the same time it has a high formal tax rate of 6% on personal and small businesses’ income.
Many don’t pay the highest rate, because legislatures past have given out too many tax breaks to their influential well-heeled constituents. But that high rate is unquestionably a poster child for Louisiana’s business climate, telling new companies they ought to stay away.
It’s more than atmospherics, though, as key lawmakers have generated a reasonable consensus around elimination of a huge tax break that is almost unique among the states. Today, people deduct federal income taxes paid from their state income.
Repealing that is good policy, as Gov. John Bel Edwards and GOP leaders in the Legislature agree. As it’s a big revenue item, about $850 million a year, that gives flexibility — if passed by lawmakers and then approved by voters — for the kind of changes envisioned in bills proposed by Rep. Stuart Bishop, R-Lafayette, and Sen. Bret Allain, R-Franklin.
How this will work out is, of course, problematic. But the good news is that Edwards, a Democrat, and the GOP leadership have a chance to unite in this Legislature around significant steps forward.
There are many new members of the state House, in particular, because of term limits. The newbies may be timorous politically but we think that many, having been in business themselves, are sick of such a lousy tax system. They might make bolder votes on major bills than many now expect.
We don’t know what will come out of the session but there is some real leadership here at several levels. Let’s not count it out too soon.