Louisiana Bumps Toward the Bottom of Yet Another List
Louisiana dropped one spot from Number 39 to 40 on the Tax Foundation’s 2024 State Business Tax Climate Index, showing what many businesses and individuals already know: the state’s tax climate needs an overhaul.
The report ranks all fifty states based on the collective burdens of each state’s corporate income tax, individual income tax, sales tax, unemployment insurance, and property tax. Last year, Louisiana managed to move up the list a few spots from 42 to 39, and now back down to 40. What is causing all these moves, and more importantly, what can we do to improve?
Louisiana made some notable improvements to the personal and business taxes in 2022 by lowering corporate and personal income tax rates and reducing the corporate franchise tax. These actions improved our tax structure relative to other states, and in turn, improved our ranking in the 2023 index.
However, the state failed to make any additional significant improvements to its tax structure during the 2023 Legislative Session, which is designated specifically for fiscal matters. The Legislature passed, but the Governor vetoed, Senate Bill 1, which would have phased out the corporate franchise tax. This tax is particularly burdensome on business because of its immense compliance costs, plus it is a tax that a business must pay whether or not it makes a profit.
The lack of further fiscal reform in Louisiana, combined with other states continuing to reform their tax systems, means that Louisiana has moved back down this competitive list. This means that companies will be less likely to choose Louisiana to do business, or to expand their business, no matter the economic development incentive package that is offered.
In fact, one of the biggest movers on the index was our neighbor, Mississippi, which moved up the rank seven spots to 20th because it implemented a flat personal income tax and passed a bill to phase out its franchise tax.
Louisiana can achieve the same through a comeback!
The Pelican Institute has a plan for sweeping fiscal reform. It includes a flat income tax for individuals and businesses. The plan also eliminates the two most burdensome business taxes—franchise and inventory—which are both taxes paid regardless of profit.
The Tax Foundation measured our tax plan against the State Business Tax Climate Index with a simulated ranking based on the 2023 index to see how Louisiana would stack up if these reforms had been enacted this year, and assuming no other states have made any changes.*Tax Foundation: the scores reflect Pelican’s proposed reforms as if the reforms had been in place at the time of our 2023 Index, and without a view to what states may have done in the interim or may do in the future.
The results of this simulation show that Pelican’s tax plan is urgently needed for Louisiana to kickstart the economy into immediate growth and increase the number of available jobs in the state. A recent poll shows that 58% of Louisiana voters support phasing out the state income tax (only 20% oppose), and 66% want leaders to prioritize responsible budgeting and limiting the growth of state spending to bring fiscal stability to state government (only 9% oppose).
The plan is the latest part of the Pelican Institute’s Comeback Agenda released in March of this year. It presents a series of policies critical to the state’s future, including tax and budget reform, guaranteeing universal education freedom, enhancing public safety, and reducing regulatory barriers to work.
Louisiana doesn’t have to continue losing out to Mississippi and other states. We can change this. Let’s get to work.
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