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Louisiana lawmakers should be properly funding education, childcare, health care and
other priorities that strengthen Louisiana’s economy and make a meaningful difference
in the lives of the millions of Louisianans.
Instead, too many are intent on quietly pushing through a special session tax package that would have low- and middle-income families subsidize tax cuts for the wealthy and corporations.
Louisiana’s tax system already asks low- and middle-income households to contribute
more of their income to state and local taxes than wealthy households. Currently, the
lowest earning 20% of Louisiana households pay twice as much of their income in
taxes – 13.1% – as the wealthiest 1%, who pay just 6.5% of their income.
Gov. Landry’s tax plan would replace millions in income tax revenue, a tax that is based
on one’s ability to pay, with new sales tax revenue that would disproportionately hit the
pocketbooks of low- and middle-income families. This would be done by turning
Louisiana’s tiered personal and corporate income tax rates into a flat tax – meaning
teachers and firefighters would pay the same tax rate as our state’s millionaires.
The plan also eliminates the corporate franchise tax, often the only option for large
multinational corporations to meaningfully contribute to funding things such as schools,
transportation and health care because Louisiana has not enacted worldwide or
domestic combined reporting which ensure that corporations pay income tax on the full
amount of profit made in that state.
To pay for these tax cuts, lawmakers plan on increasing the state sales tax to 5%
– a .55 cent increase from where it is today. This is a 1 cent increase from the
anticipated 4% rate set to go into effect July 2025.
Lawmakers also chose to expand the sales tax base in addition to the rate by taxing digital products such as Netflix.
This tax swap would result in the lowest-income 20% of Louisianans (with
incomes under $22,100 a year) receiving a small tax increase due to the state’s
additional reliance on deeply regressive sales taxes. Middle-income households making
$55,900 on average would receive an average cut of $87. Meanwhile, the wealthiest 1% of Louisiana households with average annual incomes of $1.8 million would
receive an average tax cut of nearly $15,400 – more than a full-time minimum wage
worker would make in a year in Louisiana.
Gov. Landry’s original tax package was expected to cost the state upwards of $2 billion
over the next five years, jeopardizing future funding for higher education and health care.
Large corporations would receive hundreds of millions of dollars in tax cuts due to the
proposed corporate income tax cut and elimination of the corporate franchise tax, which
would overwhelmingly benefit out-of-state shareholders with little to no benefit trickling
down to the average Louisianan.
As key revenue raising portions of the governor’s original tax plan such as expanding
sales tax to services and eliminating programs such as the film industry tax credit were removed under pressure from lobbyists and interest groups, lawmakers chose to increase the state sales tax and shift the cost to everyday Louisianans instead.
The reworked package passed the Senate with only a single senator objecting. Lawmakers also chose to temporarily allocate revenue from vehicle sales taxes to the general fund from the transportation trust fund which funds infrastructure projects in an attempt to buffer out the revenue loss from income tax cuts.
Lawmakers in support of the tax overhaul have pointed to states such as North Carolina as inspiration, but what they’re failing to recognize is that North Carolina’s economy was
growing at a faster pace before the state enacted major tax cuts. And years of deep tax
cuts in North Carolina have resulted in massive amounts of revenue loss and
underinvestment that have lawmakers and North Carolinians sounding the alarm over
the growing list of unmet needs – particularly around child care shortages, early
childhood education and K-12 funding.
For instance, North Carolina ranks near the bottom of the list for per pupil funding and K-12 funding proportional to state wealth.
Hardly a model worth replicating.
Tax cuts for the wealthy and corporations will not make Louisiana more competitive.
Rather, they will blow a hole in our state budget while asking low- and middle-income
working families to make up the difference. Gov. Landry and the Louisiana Legislature
would make much better use of their time looking for ways to make Louisiana’s tax
structure fairer and more capable of adequately funding important priorities.
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