NEW ORLEANS — Four tax raising scenarios currently under consideration by the Louisiana Legislature would result in significant job loss and declines in Louisiana’s gross domestic product (GDP), according to a new report released by the Pelican Institute.
The study, which was conducted in a partnership between the Pelican Institute and The Buckeye Institute’s Economic Research Center, reveals the tax-hike proposals under consideration would devastate Louisiana’s already-fragile economy, costing the state up to 2,800 jobs and dropping the state’s GDP up to $190 million in the first year alone.
Specifically, the study projects the economic impact of increasing the state sales tax by a quarter-penny, increasing the state sales tax by a half-penny, compressing personal income tax brackets and reducing individual income tax deductions.
According to the study, raising the sales tax by a quarter-penny would lead to a net loss of 1,400 jobs and a decrease in the state’s GDP by $86 million in the first year alone. Increasing the sales tax by a half-penny would essentially double these negative impacts in the first year, bringing job losses to 2,800 and decreasing the GDP by $173 million.
By reducing the top of the four percent tax bracket to $25,000, lawmakers would cause a first-year net loss of 2,600 jobs and decrease GDP by $191 million, while raising $190 million in new revenue. Lastly, reducing the amount allowable for individual income tax deductions due to excess federal itemized deductions would, within a year, lead to the net loss of 700 jobs and reduce the state’s GDP by $56 million, while raising $56 million in new tax revenue.
Daniel Erspamer, chief executive of the Pelican Institute, urged Louisiana lawmakers to consider the major negative impacts of tax proposals as they consider them during the upcoming special legislative session.
“As Louisianans look forward to some much-needed relief thanks to the expiration of the state sales tax hike coming this July, Gov. John Bel Edwards and several state lawmakers are now crying poor, saying the state can’t do its job without more tax increases,” Erspamer said. “They are hoping Louisiana taxpayers will simply believe their scare tactics, trust them to know what’s best and then pay up. Louisianans deserve to know the truth about the effects on their wallets and their state from the budget being debated, and this report will give them the tools they need to make informed decisions and see through the rhetoric.”
These statistics were compiled using a dynamic scoring model, which better reflects the reactions of people and businesses to government policies. Dr. Andrew Kidd, the senior economist at The Buckeye Institute’s Economic Research Center, said dynamic scoring provides a realistic estimate of the impacts of tax increases on Louisiana’s economy.
“This model presents a more meaningful estimate of how government tax, spending and regulatory policies affect real-life decisions made by Louisianans every day and how those decisions impact the larger economy,” Kidd said. “Louisiana citizens need to understand how the actions of their lawmakers directly and indirectly impact their daily lives and well-being, and this report gives them the information and insight they need to hold their policymakers accountable.”
Click here to view the full study from the Pelican Institute for Public Policy.
The Pelican Institute is a nonpartisan research and educational organization – a think tank – and the leading voice for free markets in Louisiana. The Institute’s mission is to conduct research and analysis that advances sound policies based on free enterprise, individual liberty, and constitutionally-limited government. For more information, visit PelicanInstitute.org.
