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Gov. Edwards, Tax Foundation differ on state’s tax ranking

October 8, 2019
Originally posted on The Center Square

Throughout his re-election campaign, Gov. John Bel Edwards has touted Louisiana’s fifth-lowest state and local tax burden as one of his administration’s accomplishments. It's a claim, critics say, for which he should not be taking credit.

Edwards recently tweeted, “When I became Governor, we had the 5th lowest combined state and local tax burden in the country. Today, we still have the 5th lowest combined state and local tax burden.”

In response, Jared Walczak, director of State Tax Policy at the Washington, D.C.-based Tax Foundation, replied, “Governor, while Louisiana's tax burden is moderate, the reason the state's ranking has remained constant is because we discontinued the study you cite several years ago, and the most recent figures are for FY 2012.”

When asked to respond, Edwards’ campaign told The Center Square that Edwards is referring to a March 2019 USA Today story, which says Louisiana was fifth lowest behind Tennessee, Wyoming, South Dakota and Alaska for overall tax burdens.

The USA Today story, however, says it relies on 2012 data from the Tax Foundation, a Washington D.C.-based nonprofit that analyzes taxing and spending policies at the local, state and federal level. The Edwards campaign did not directly respond to the Tax Foundation's criticism.

Louisianans overall paid 7.6 percent of their income in 2012, according to the USA Today analysis. Broken down by income per capita, Louisiana ranked 11th lowest in 2012; by income tax collections per capita, 13th lowest; by property tax collections per capita, 8th lowest; and by general sales tax collections per capita, 14th lowest; USA Today reports.

But 2019 Tax Foundation rankings show that Louisiana has on average the second-highest sales tax rate in the U.S. (9.45 percent when local income taxes are included), the second-highest personal income tax ratein the South, and the highest corporate income tax rate in the South, and among one of the highest in the nation.

A 2018 WalletHub study ranked Louisiana’s tax burden 27th, with an overall tax burden of 8.43 percent.

Both the 2019 and 2018 Tax Foundation State Business Tax Climate Index ranked Louisiana 44th. While its “sales tax rate nudged down, a convoluted tax code with high rates still has the state at #44,” the foundation says.

The foundation also ranked Louisiana 36th for corporate taxes, 32nd for individual taxes, 32nd for property taxes, and 4th for unemployment insurance taxes.

The index analyzed five variables, noting that states’ rankings can also rise or fall based on reforms implemented in other states. States are rewarded for transparency and neutral tax codes and penalized for having tax codes that are burdensome, complex and economically harmful, according to the Index.

Louisiana's low business climate ranking comes as no surprise, Jim Patterson, vice president of Government Relations at the Louisiana Association of Business and Industry, told The Center Square, because of “massive tax increases legislated against businesses in 2015 and 2016 and supported by John Bel Edwards as a state representative in 2015 and as governor in 2016.”

According to Legislative Fiscal Office projections, these new taxes on Louisiana businesses account for new tax revenues of $575 million in 2016, $1.3 billion in 2017, $1.3 billion in 2018, $884 million in 2019, and an estimated $922.5 million in 2020, $968 million in 2021, $974 million in 2022, and $995 million in 2023.

That's more than $7.9 billion during this 8-year period, Patterson notes.

“Not only does Louisiana have proportionately higher business taxes than most states, along with some taxes (inventory, franchise, manufacturing utilities) that are not paid by businesses in most states,” Patterson added, “but our state also saddles businesses with administrative red tape that doesn’t exist in other states. A glaring example of this is our requirement that local sales taxes be paid to some 58 local sales tax collectors across Louisiana. Whereas all but one other state have a single point of collection for local sales taxes.”

Louisiana did show signs of economic growth according to the most recent report released by the Bureau of Economic Analysis (BEA). Louisiana’s real gross domestic product (GDP) increased to 3.8 percent from the previous quarter’s 1.9 percent, the ninth best showing in the country for the period.

All 50 states and the District of Columbia reported increases in the first quarter of 2019, BEA notes.