Louisiana is an outlier in the southeast when it comes to tax policy. While most states in the region are cutting taxes, Louisiana is raising them.
Down the Gulf Coast from the Pelican State in nearby Florida, the nation’s third most populous state after California and Texas, Republican Gov. Rick Scott is getting ready to close out his second term having cut taxes every single year since taking office in 2011. In total, he has provided more than $10 billion in relief to Sunshine State taxpayers.
To Louisiana’s west, in Texas, a state that, like Florida, already boasts no income tax, Republican Gov. Greg Abbott enacted a $4 billion two-year tax cut package shortly after taking office in 2015. Moving forward, Abbott has committed to delivering further tax relief in 2019.
To Louisiana’s north in Arkansas, Republican Gov. Asa Hutchinson cut taxes for middle-income households right after taking office in 2015 and then used 2017 to cut taxes for low-income households. In 2019, Hutchinson aims to build upon these reforms by lowering the top income tax rate.
Louisiana’s neighbor to the east, Mississippi, has also become a more attractive place to do business and invest in recent years. There, Republican Gov. Phil Bryant and Lt. Gov. Tate Reeves enacted $415 million in tax relief two years ago, which was the largest tax cut in state history. The 2016 tax cut featured a phase out of the franchise tax as well as income tax relief.
Meanwhile, in Louisiana, Democratic Gov. John Bel Edwards is taking his state in the opposite fiscal direction of all its neighbors.
Shortly after taking office in 2016, Edwards enacted the largest tax increase in Pelican State history, “temporarily” raising the sales tax 25 percent by increasing the rate from 4 percent to 5 percent. This tax hike, which was supposed to completely expire on June 30 of this year, siphoned $1.5 billion a year from the bank accounts of Louisiana taxpayers.
Unfortunately for Louisiana taxpayers, that sales tax hike was only the beginning. While nearly all other governors in the southeast have focused on balancing their state budgets without raising taxes, Edwards remains committed to raising taxes on Louisianans as his primary approach to balancing the state budget. This year alone, Edwards has hit Louisianans with more than $800 million in further tax hikes on top of those instituted shortly after he took office.
The first major tax hike of 2018 came from Edwards’ decision to keep the excess revenue the state will collect as an unintended consequence of federal tax reform. If no actions are taken by state lawmakers, Louisiana will be collecting more revenue than it would have under the old federal tax code due to the way the state tax code conforms to the federal code. This unintentional bump in state revenue collections is not unique to Louisiana. The key difference lies in what state lawmakers decide to do with the new money.
Many of Edwards’ counterparts in other governor’s mansions, such as Rick Snyder, R-Mich., Henry McMaster, R-S.C., and Doug Ducey, R-Az., have proposed taking this unexpected uptick in state tax collections and returning it to their constituents in the form of state tax relief. Edwards’ decision to keep this excess revenue is a sneaky way to spend an additional $350 million without even having to ask legislators to vote on it.
Adding insult to taxpayer injury, Edwards signed another massive tax hike into law on June 24, totaling $463 million annually. This latest tax hike, which took three special sessions to pass, replaces the “temporary” 1.0 percentage point sales tax increase that expired on June 30 with a 0.45 percent sales tax increase. Rather than returning to the old rate of 4 percent on July 1, as was promised, the state sales tax instead increased from 4 percent to 4.45 percent. Worse, that does not include local tax, which in most parishes means taxpayers will once again be paying among the highest sales tax rates in the nation.
It is difficult to understand how Edwards’ became so committed to raising taxes on Louisianans. After all, state and local spending per capita in Louisiana is already higher than Texas, Arkansas, Mississippi, Alabama, Florida, and every other state in the region, yet Louisiana consistently comes in dead last, or in the bottom tier, in nearly every ranking of state outcomes.
The only thing Louisiana has to show for the tax-and-spend policies imposed by the Edwards administration is an underperforming economy. According to Bureau of Economic Analysis data, Louisiana was the only state in its region and one of just three states in the nation that saw its economy shrink in 2017, right on the heels of Edwards’ enactment of a massive “temporary” sales tax increase in 2016 that turned out to be not so temporary. The latest round of tax hikes from Edwards is likely to make matters worse. A recent report by the Pelican Institute for Public Policy found that increasing the state sales tax rate would kill jobs and depress economic growth in Louisiana.
While many governors across the southeast have provided tax relief to individuals, families, and businesses in their states, Louisianans continue to struggle under an increasing tax burden and unimpressive economy. As long as Edwards occupies the governor’s mansion, Louisiana looks to remain a tax hiking outlier in a region full of states enacting tax cuts. The good news for Louisiana residents is there is an election coming up next year that provides an opportunity to upend this unacceptable status quo.
Margaret Mire is state affairs manager at Americans for Tax Reform and a former policy analyst at the Pelican Institute for Public Policy. Patrick Gleason is vice president of state affairs at Americans for Tax Reform and a senior fellow at the Beacon Center of Tennessee.
