Governor Sarah Huckabee Sanders of Arkansas recently called for a special legislative session to address taxes. She touted Arkansas’ “financial stability, increased economic growth, healthy reserve accounts, and conservative spending policies” as the rationale. The session, which ended in mid-June, made Arkansas more competitive in attracting businesses and fostering economic growth. This strategy culminated in the lowering of the state’s top income tax rate to 3.9%, the lowest in 100 years, and follows two previous tax cuts in the last 15 months. It’s also part of a broader trend among southern states like South Carolina, North Carolina, and Mississippi, which have all pursued tax reductions to enhance their economic appeal.

Meanwhile, Louisiana continues to lag and risks falling even further behind if it does not adopt similar measures. The Pelican Institute’s recent proposed “Responsible Louisiana Budget” provides a comprehensive roadmap for achieving strong economic growth through fiscal responsibility and tax reform.

Governor Sanders’ proposal, like Pelican’s, emphasizes the need for spending restraint to enable sustainable tax reform. Louisiana’s budget practices, detailed in the “Citizen’s Guide to the Louisiana Budget,” involve a mixed approach to fiscal responsibility. The state has made commendable efforts in directing surplus funds towards one-time expenses, such as infrastructure improvements and debt reduction. However, substantial portions of the state’s budget are still allocated to recurring expenses and non-essential projects, which impede long-term fiscal stability.

Pelican’s reports stress that without disciplined spending, meaningful tax reform in Louisiana remains elusive. The most recent state budget approved by lawmakers demonstrates an inability to fully commit to responsible spending. Despite some positive steps, the inclusion of significant pork barrel spending and additional recurring expenses undermines these efforts. More stringent fiscal policies, including a stronger expenditure limit that ensures that spending doesn’t exceed a combined rate of inflation plus state population growth, can help the state live within its means and create room for tax cuts for Louisiana’s hardworking people.

Governor Sanders’ tax reduction agenda offers a valuable lesson for Louisiana. The state must adopt rigorous spending restraint to allow room for tax cuts, and eliminate the fiscal roller coaster created from unstable polices. By doing so, Louisiana can enhance its competitiveness, attract businesses, and stimulate economic growth. It is imperative for Louisiana to act now, or risk being left behind as other southern states forge ahead with pro-growth tax policies.