The Tax Foundation’s recently released 2026 State Tax Competitiveness Index ranks Louisiana 31st in the nation, a middling position that reflects the state’s economic climate. While Louisiana has taken modest steps to simplify its tax code, government spending continues to grow faster than the economy—and that’s what keeps the state stuck in neutral.

Across the country, the story is becoming clear. States that maintain a limited and predictable government are the ones that attract new residents, jobs, and businesses. Those that allow spending to balloon are watching people and investment leave.

The Real Problem: Spending, Not Just Taxes

Louisiana’s tax structure looks competitive in some areas, but high and complex spending patterns undermine those gains. The state ranks 10th in corporate taxes and 15th in individual income taxes after its 2024 reforms. However, it ranks 50th—dead last—in sales-tax simplicity due to its fragmented local collection system. Property taxes are moderate at 22nd, but they continue to climb as local budgets expand.

The real obstacle is not insufficient revenue; it’s a lack of fiscal restraint. When state spending grows faster than population growth plus inflation, taxpayers lose purchasing power, and the private economy—the engine of prosperity—shrinks. Every dollar the government spends must first be taken from someone who earned it. The longer this pattern persists, the more challenging it becomes for families and businesses to plan, invest, and thrive.

Learning from Our Neighbor: What Mississippi Is Doing Right

Louisiana’s neighbor, Mississippi, is taking a disciplined and forward-looking approach. Under the Build Up Mississippi Act, enacted in 2022, the state is phasing out its individual income tax through a series of scheduled rate reductions. The top rate will fall to 3 percent by 2030—a goal Louisiana has already achieved—but then further cuts will occur automatically if revenues and reserves meet defined benchmarks. Louisiana has no such automatic trigger or plan to achieve further reductions. In fact, earlier this year, state senators balked at a proposal to lower the rate to 2.75%. Analyses from the Mississippi Policy Center and ALEC indicate that Mississippi’s  forward-looking plan fosters certainty for employers and workers who can anticipate the direction of policy.

That clarity matters. Expectations shape behavior. When people know tax burdens will decline, they invest more, relocate more confidently, and hire more aggressively. It’s not simply about the current rate; it’s about the direction of policy. Mississippi is communicating that its government intends to grow less so that its people can grow more.

What Louisiana Should Do Next

If Louisiana wants to rise in competitiveness and attract long-term investment, it needs two straightforward reforms:

  1. Cap government growth.

Adopt a rule that limits the state’s annual budget growth to less than the combined rate of population and inflation. This approach keeps the government aligned with taxpayers’ ability to pay, allowing surpluses to build naturally without the need for higher taxes.

  1. Establish a clear path to lower income tax rates.

Once spending is under control, dedicate future surpluses to permanent income tax rate reductions. Louisiana’s current top individual income tax rate is lower than Mississippi’s, yet Mississippi’s trajectory is clearer. Direction and discipline are what create growth, not merely rate differences on paper.

The Bigger Lesson

Economic freedom is not just an accounting exercise—it’s a moral principle. Prosperity occurs when individuals, not bureaucracies, determine how to allocate their earnings. States that respect that truth, such as Mississippi, Texas, Florida, and Tennessee, are outperforming those that treat government as the primary driver of opportunity.

Louisiana can join that group, but only if it confronts its spending habits and sends a credible signal that tax burdens will continue to fall. Fiscal restraint and predictable policy are the cornerstones of growth. The path to prosperity is simple: spend less, tax less, and trust people to make their own choices. That’s how Louisiana—and every state—can let people prosper.