Louisiana Ranked Among Worst States for Business

Louisiana Ranked Among Worst States for Business

State falls from 7th to 37th in annual survey of CEOs

Louisiana ranks as the 37th best state for business, according to Chief Executive’s 2016 Best and Worst States For Business report. Remarkably, the report ranks Louisiana 30 spots lower than it did last year. This represents the largest decline of any state in the nation.

The report is based on survey responses from 513 CEOs, who were asked to rank states with which they are familiar “on the friendliness of their tax and regulatory regime, workforce quality and living environment.” Living environment includes cost of living, education system and state and local attitude towards businesses.

Not surprisingly, Louisiana’s ongoing financial shortfall played a role in the state’s drastic fall from 2015’s 7thbest. Of this, Chief Executive highlights:

“Louisiana, which once ranked among the top 10, dropped to 37th place, no doubt owing to its current $940 million budget disaster.”

Meanwhile, most other southern states are rated more highly by CEOs.

Texas, Florida and Tennessee held onto their 2015 rankings among the top 5, as the 1st, 2ndand 4th best states for business. Alabama and Kentucky improved 4 spots from 2015, now ranking 20th and 24th best. And quite the opposite from Louisiana, Arkansas improved 10 spots from last year, and now ranks 23rd best.

It is important to note Chief Executive’s report is not the first to suggest Louisiana needs business-friendly reforms. The Tax Foundation’s 2016 State Business Tax Climate Index also ranks Louisiana 37th best.

And again, similarly to Chief Executive’s findings, the Tax Foundation also finds Louisiana to be less appealing to businesses than most of its neighboring states. The 2016 State Business Tax Climate Index ranks Florida as the 4th best business tax climate, Texas 10th, Tennessee 16th, Mississippi 20th and Alabama 29th.

The Tax Foundation determined these rankings by comparing the states on more than 100 different variables in the primary forms of taxation: corporate, individual income, sales, unemployment insurance and property.

Of their finding, the Tax Foundation concludes:

“The absence of a major tax is a common factor among many of the top states…the states in the bottom 10 tend to have a number of affiliations in common: complex, non-neutral taxes with comparatively high rates.”

As Louisianans are well aware, the Pelican State does not share the common trait among top 10 states. It does, however, have traits in common with bottom 10 states.

In particular, the report ranks Louisiana’s sales tax 50th in the nation and its corporate tax 38th. With that, the report also ranks Louisiana’s individual income and property taxes rank among the bottom 25 states, at 27th and 28th. Only Louisiana’s unemployment insurance tax was found to be among the best in the nation, which the report ranks 5th.

Unfortunately, this is not the end of the bad news for the Pelican State. The Tax Foundation’s report is based on “tax systems as of July 1, 2015 (the beginning of Fiscal Year 2016),” meaning it does not include the recent tax increases passed in Louisiana’s 2016 special session.

The results of that session will likely make Louisiana even less desirable. For example, now the Pelican State’s already high sales tax is even higher. In fact, Louisiana’s tax and business climates have even attracted the attention of Florida Governor Rick Scott, who recently tweeted:

“While we are fighting every day to grow jobs in Florida, Louisiana elected officials are clearly not focused on creating new opportunities.” Governor Scott also tweeted: “LA leaders don’t understand raising taxes hurts job creators & families. In FL, we have cut taxes 50 times & saved taxpayers $5.5 billion.”

While Louisiana’s policies draw unfavorable reviews from executives and tax analysts, Florida has made noteworthy pro-business reforms. Chief Executive boasts of the state in its 2016 Best and Worst States for Business report:

The Sunshine State added 1 million private-sector jobs over the last five years, cut taxes 50 times and got rid of 4,200 burdensome regulations. In 2014, it surpassed New York as the third-biggest state for companies to flourish.”

As Louisiana lawmakers continue to sort through the state’s deficit crisis in the coming months, it is crucial they understand that their decisions can either stimulate or stunt economic growth. In their 2016 Business Tax Climate Index, the Tax Foundation explains businesses can move to nearby states with lower tax burdens, warning:

“The evidence shows that states with the best tax systems will be the most competitive at attracting new businesses and most effective at generating economic and employment growth…When a state imposes higher taxes than a neighboring state, businesses will cross the border to some extent.”

If Louisiana wants to keep existing businesses and encourage relocations, it must undergo a budgetary overhaul and engage in substantive tax reform. A broken tax code and regular budget shortfalls will only trap Louisiana in a downward spiral.

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