BATON ROUGE, La. — Today, the Louisiana Department of Revenue and Louisiana Economic Development released a primer on Louisiana's tax structure that is intended to inform deliberations on tax reform leading up to the 2013 legislative session. Gov. Bobby Jindal has indicated tax reform will be his top legislative priority in 2013, and he has designated Tim Barfield at LDR as the administration's tax reform leader.
Barfield said, "We're at an important crossroads in our state's history, and one of the most important contributions we can make is to create a Louisiana tax system that's fairer and simpler for our citizens and our businesses. I firmly believe we can create a tax structure that's both fair and competitive while maintaining budget neutrality."
The primer provides an overview of Louisiana's tax structure for individuals, families and businesses while detailing the various rankings of Louisiana's tax competitiveness relative to other states. The document also summarizes the more than 460 state tax exemptions utilized by individuals, families and businesses in Louisiana.
The report notes that a state's tax structure, including exemptions, is an important aspect of its overall economic competitiveness, which has a significant impact on business investment decisions. An ideal tax structure generally is considered to be one with a broad base; low, flat rates; multiple revenue sources; and relatively few exemptions, making compliance easier and less costly for both the taxpayer and government.
Corporate tax burdens in Louisiana generally are low in comparison to those in other states, but Louisiana's tax structure sometimes ranks poorly due to its complexity (e.g., more exemptions than in many other states, resulting in relatively high rates for income and sales taxes; relatively high number of corporate income tax brackets; hundreds of locally administered sales tax jurisdictions). Accordingly, while Louisiana offers relatively low state/local business tax burdens, the state often doesn't get credit for this reality because third parties rarely are aware of all of the details about Louisiana's many tax exemptions and their impact on actual state/local tax burdens.
For example, according to a recent 50-state analysis published by the Tax Foundation and KPMG entitled Location Matters, Louisiana's state/local corporate tax burdens rank No. 2 (second-lowest) in the country for new business operations and No. 10 for mature business operations. However, the Tax Foundation also publishes a separate report, the State Business Tax Climate Index, which ranks states on the structure of their tax systems (e.g., level of complexity, such as number of exemptions, number of tax types or number of separately administered local sales tax jurisdictions) without regard to actual tax burdens. In the State Business Tax Climate Index, Louisiana places No. 32 in the country.
LDR's 2011-12 Tax Exemption Budget reported 468 state tax exemptions available through the tax code for state fiscal year 2010-11, including constitutional, statutory and federal exemptions. Constitutional and statutory exemptions, excluding federal exemptions, totaled $6.8 billion that year. Of the $6.8 billion in total exemptions, economic development incentive programs managed by LED collectively amounted to five percent of the value of all state tax exemptions; accordingly, non-LED programs were responsible for about 95 percent of the value of tax exemptions in the 2010-11 fiscal year.
Because tax exemptions (e.g., exclusions, deductions, credits) directly impact actual taxes paid by individuals, families and businesses, the report emphasizes that any evaluation of state tax exemptions must be considered within the context of their impact on the overall tax structure of a state.
LED Secretary Stephen Moret said, "Tax reform represents a major opportunity for us to improve the reality and national perception of our business climate in a budget-neutral fashion, which will enable us to better support the retention and growth of our existing businesses as well as to more easily attract new business investment and jobs in the future."
Download the Primer on State Tax Structure prepared by the Louisiana Department of Revenue and Louisiana Economic Development.