Years of poor public policy have driven families and businesses out of the Pelican State, leaving it with the sixth-highest outmigration rate in the country. But there’s hope on the horizon in the ongoing special session.

A recent report from the Pelican Institute outlines a path to recovery through bold fiscal reform, including eliminating the corporate franchise tax. This outdated and harmful tax is a barrier to investment and job creation, and its removal could jumpstart the state’s economic revival.

Why the Corporate Franchise Tax Holds Louisiana Back

Louisiana is one of only 16 states that imposes a corporate franchise tax—a form of “cover charge” businesses must pay to operate in the state. Unlike corporate income taxes, which are tied to a company’s profits, the franchise tax is levied on a company’s assets, including capital stock and surplus, regardless of profitability. In other words, it penalizes businesses simply for existing, discouraging investment and stifling entrepreneurship. Neighboring states like Mississippi are already phasing out their franchise taxes, making Louisiana less competitive by comparison.

Although the corporate franchise tax generates only about 3% of Louisiana’s revenue, its economic cost is substantial.

According to the Pelican Institute’s recent report, eliminating this tax could attract new businesses and help retain those struggling with Louisiana’s high tax burden. By removing this barrier, Louisiana could signal that it is open for business, encouraging job creators to stay and new entrepreneurs to invest.

Economic Impact of Franchise Tax Elimination

The Pelican Institute’s report and data from the Economic Research Center show the substantial economic benefits of eliminating the franchise tax:

  • Economic output could rise by $360 million in the first year alone, with ongoing gains each subsequent year.
  • Employment would increase by at least 1,000 jobs, creating more opportunities for Louisiana’s residents.
  • Investment would see an immediate boost of over $220 million, supporting business growth and innovation.

These are not just numbers; they represent real people and real opportunities. Every dollar of new economic output and each new job reflects a step toward a more prosperous and vibrant Louisiana. And while the franchise tax brings in about $212 million annually, the positive economic impact from its elimination could offset much of this revenue loss through gains in other taxes, such as personal income tax, as more people find work and spend money locally.

Governor’s Plan: A Step in the Right Direction

Governor Jeff Landry’s plan to eliminate the franchise tax is a big step forward. By removing this barrier to economic growth, the governor’s proposal aligns with what many economists and business leaders have been urging for years: a simplified and more competitive tax structure that attracts businesses instead of pushing them away. This plan represents a much-needed change for Louisiana, especially as it competes with neighboring states like Texas, which has no personal income or corporate income taxes.

The Tax Foundation’s State Competitiveness Index currently ranks Louisiana 40th out of 50 states. Much of this low ranking is due to the corporate franchise tax and other burdensome tax structures like the inventory tax. Eliminating the franchise tax could help lift Louisiana in these rankings, making it a more attractive destination for new businesses and residents.

Fiscal Responsibility: Rein in Government Spending

However, tax reform alone is not enough. Louisiana must also address its spending problem. A strong spending limit is essential to ensure that taxpayer money is used wisely and that the state’s fiscal house remains in order. Without a strict cap on government spending, any progress from tax cuts could be undermined by runaway spending that leads to future tax increases or budget crises.

The Pelican Institute’s report emphasizes the importance of enacting a strong spending limit that ties state spending growth to a maximum of the rate of population growth plus inflation. This approach, already used in several states, ensures that the government does not grow faster than taxpayers’ ability to support it. With a solid spending limit, Louisiana could safeguard its fiscal health while creating a more stable and predictable environment for economic growth.

A New Era for the Pelican State

The elimination of the corporate franchise tax and a robust spending limit could lay the foundation for a brighter economic future for Louisiana. Since 2017, the state has lost over 107,000 residents—roughly the population of Lafayette—as people have moved to states with more competitive tax environments. Louisiana can reverse this trend by reducing the tax burden and ensuring fiscal discipline, attracting families and businesses back to the Pelican State.

The path forward is clear: eliminate the corporate franchise tax to jumpstart economic growth and impose a strong spending limit to keep the government accountable. The Pelican Institute’s vision for a prosperous Louisiana is within reach, but it requires the courage to make tough choices today for a better tomorrow.

Conclusion: Time for Louisiana’s Comeback

Louisiana’s policymakers have a unique opportunity to transform the state’s economic landscape. By adopting Governor Landry’s plan to eliminate the corporate franchise tax and enact meaningful spending reforms, they can set Louisiana on a path to long-term prosperity. This is not just about tax cuts; it’s about creating an environment where businesses can thrive, families can grow, and communities can flourish.