The Louisiana legislative session is fast approaching, and tax reform as a means to retain businesses and families is high on the list of issues to tackle. Newell spoke to Pelican Institute CEO Daniel Erspamer Tuesday morning to see what proposals are on the table.
“We had both State Senator Bret Allain and Robert Travis Scott from the Public Affairs Research Council on Tommy's show earlier today as to what we should expect in the upcoming legislative session,” Newell began. “How do you guys see this going, and what are y'all advocating for?”
“Big picture, here's the question I think we have to ask - how do we ensure that coming out of the pandemic we can recreate an economy that brings jobs back, that brings opportunity?” Erspamer said. “Our state public policy issues are often the very thing that block new enterprises and new talent coming into the state. And the top of that list is tax reform. What we advocate is simpler, flatter, fairer. We can get into the details of that, but basically, we have one of the most complex tax codes in the country, and it's time for the legislature to fix that problem.”
“When we say the most complex - specifically what area would you identify as the most complex?” Newell asked.
“I would point to two. So if we start with our corporate income tax, there are two areas of complexity. There first is a graduated rate. Depending on what level of income we're talking about, companies, enterprises, small businesses pay anywhere between 2% and 8% - the highest in the region by quite a bit. But more importantly, there are 435 pages, not instances, but pages of tax preferences, carve-outs, credits, and deductions in the corporate tax code itself. If you're running a company, you want the best tax environment, the most predictable one. We've just put band-aids over band-aids over band-aids instead of actually simplifying the system so that everyone has a fair playing field and that lots of different companies can thrive perfectly. The same thing is true on the individual side. If you're an individual, you pay somewhere between 2% and 6%, and we have a myriad of deductions and carve outs. So what happens is that our policies are tied to the federal government, and there's a lack of predictability, which is the number one thing enterprises and individuals want as they look for a state to settle.”
“Let's go to corporate tax first,” Newell continued. “Why is it that we don't attack the deductions and the exemptions and once we rid ourselves of that, we find out where that rate could ultimately be so it's revenue neutral, and we recognize that we could just simplify this by eliminating 435 pages?”
“We agree entirely based on Pelican Institute research, which your listeners can find on PelicanInstitute.org,” Erspamer said. “We believe by eliminating the vast majority, if not all of the corporate exemptions, we could get that to a low rate of somewhere around 3%, which would be very competitive in the region and the country. We believe it is the first step. Now there's other reforms that are necessary over the long term, but just getting that to be simple, flat and predictable would go a long way. In fact, our research suggests within just two years, just simplifying the tax code and not doing anything else would add 4 to 6% to our GDP, which is the measure of economic activity in the state. And more importantly, would add about 15,000 new jobs for Louisiana right here at home.”
Hear the entire interview in the audio player below.
