Louisiana Governor Edwards’ Transition Committee on Fiscal Matters released its much-anticipated report on the Louisiana budget and taxes. In order to address Louisiana’s structural deficit, the Transition Committee offered the following options to reform the Louisiana tax system:
- Reduce Louisiana’s individual income tax rates across the board, if the voters agree to eliminate the deduction for federal income taxes and certain other deductions.
- Reduce excess itemized deductions and return to the tax brackets voters originally adopted in the Stelly Plan.
- Establish a flat corporate tax rate, if the voters agree to eliminate the federal income tax deduction.
- Phase out or reform the corporate franchise tax.
- Modernize the corporate tax code to broaden the base in a manner consistent with the rest of the South, including add back laws and modified apportionment of multistate corporations.
- Expand the existing state sales tax to cover certain services, and work toward a single collection and distribution system that would allow Louisiana to tax online sales in the event of changes to federal law.
- Suspend some part of the sales tax exemption on business utilities.
- Increase the fuel tax to bring it in line with the national average and index it to grow with inflation.
- Review and modify the industrial tax exemption to a single 7 year exemption and a reduction from 100% to 80% of the property value included in the exemption.
- Subject tax expenditures to the same rigorous review as expenditures contained in the state budget; eliminate those that are the least productive and modernize those that are retained so that they produce the maximum benefit to the state.
- Further reform the horizontal drilling exemption.
- Re-examine severance tax policy, which has been in place since the 1970’s.
- Establish a processing tax on hydrocarbons.
- Renew the Telecommunications tax that is set to expire and consider whether the rate should be equivalent to the general sales tax.
In addition to these tax options, the Transition Committee proposes two other notable changes:
- Establish a State Tax Court of record for consideration of all state and local tax issues statewide with appeal directly to the state Supreme Court. This should have all judicial powers available to a state district court.
- Establish a Louisiana Tax Institute as an ongoing body to assist in reform, research and continuous revision of Louisiana tax laws. The Institute would be created by the Legislature and would be comprised of tax professionals as well as representatives of other facets of Louisiana citizenry. It would be housed at a state university and have a reporter and researchers.
Stay tuned for further developments as an extraordinary session of the Louisiana Legislature is scheduled to begin in mid-February and the regular session in mid-March. The Jones Walker SALT team will be closely following these developments.