As you may know, there are four proposed amendments to our state Constitution on the ballot for November 13th (postponed from Oct. 9, 2021, due to the impact of Hurricane Ida). I wanted to address and summarize them here.
The first, Amendment No. 1, does not change our tax rates but does involve the centralized collection of state sales taxes and takes significant steps “toward consolidating and streamlining our unusually fragmented state and local sales tax system.” (parlouisiana.org). A vote “for” Amendment 1 would allow for the creation of a single government state sales tax collector (instead of multiple different government bodies as is the case now—even in the same parish) to manage all relevant matters including collection of sales taxes and electronic filing of taxes while also providing tax policy guidance and rules regarding sales tax audits.
Approval of Amendment 1, in summary, would: 1). create a new commission with representatives of state and local agencies; 2). provide for electronic filing and create a process for combined state, local and remote sales tax collection for all taxing authorities in the state.; 3). the Commission would remit revenue to the collector for each local taxing authority and to the state revenue department; 4). the Commission would also issue policy advice where needed and develop rules relative to the audit process. (parlouisiana.org).
It should not be difficult to understand that streamlining our complex, obsolete, patchwork quilt system of sales tax collection would greatly assist businesses already located here and, importantly, those we hope to attract to Louisiana. It removes bureaucratic red tape and provides a much simpler method by which companies and businesses can comply with the law.
The second, Amendment No. 2, essentially would provide for an income tax “swap” whereby the maximum possible rate of individual income tax would be reduced from 6% to 4.75% and ultimately to 4.25% when the corresponding tax reform statute is coupled with this Amendment. In return, however, the Amendment and the tax changes it would spark would eliminate the federal tax deduction (and limit excess itemized deductions to only health care expenses) for state individual income tax filers. Again, though, the elimination of the federal tax deduction (and limiting of excess itemized deductions) would presumably be offset by lower state individual income taxes. (parlouisiana.org). It’s also worth noting that included in the package of reforms that would follow with approval of Amendment 2 is the reduction (and hopefully, eventual elimination) of the franchise tax rate—a punitive tax on capital and retained earnings.
Approval of Amendment 2 would greatly assist our existing businesses and likely cause corporations across the country to take another look at Louisiana given the potential for job creation and significant new business opportunity.
The third, Amendment 3, involves the taxing authority for new levee districts and allows levee boards (ones created since 2006) to raise up to a 5-mill property tax without voter approval. I know it likely won’t surprise readers to know that I oppose allowing a levee board, based upon its own authority, to levy property taxes without voter approval. I realize levee districts serve a very important purpose in our state—primarily the construction and maintenance of levees—but so do many other government agencies that don’t possess the power to unilaterally raise taxes by a vote of their board. I don’t mean to appear to target levee boards or districts, I simply feel voters should always decide on tax increases.
The fourth, Amendment 4, involves allowing for the transfer of a greater amount of dedicated funds—increased from 5% to 10%—to the state general fund to plug a state budget deficit. Let me say first that I am aware of the vigorous debate policymakers frequently have about how many dedicated funds there are in our Louisiana Constitution. Funds that, no matter how bleak the economy or catastrophic the storm may be that hits our state, cannot be used for anything else but their dedicated purpose.
I don’t have the opportunity in this article to fully address this issue but let me say this: Louisiana is constitutionally required to maintain a balanced budget and how that is done is generally up to the governor, but I believe dedicated funds should remain dedicated. If the Legislature ever wishes to alter or “unlock” these constitutional dedications it may do so in the same way they were dedicated in the first place, by constitutional amendment. (statutory dedications would be addressed by statute). However, in the meantime, I feel it best they remain to fund those policy determinations and priorities for which they were originally dedicated. Again, if state government ever wants to undertake real reform and broadly “undo” these dedications it is certainly free to do so which would require a state constitutional convention. (Also, the state constitution can be amended—and has been many times!—in a piecemeal fashion with the approval of two-thirds of each body and a majority of voters in a statewide referendum/public vote.)
Please know I realize there are many ways to analyze and consider the foregoing Amendments.
Perhaps, in A. 1, some prefer leaving tax collections in the hands of several different government authorities, with more local control; Perhaps, in A. 2, some state taxpayers prefer to retain the federal tax deduction and not alter the individual state income tax rates; perhaps in A. 3, some prefer to allow levee districts and boards to unilaterally raise up to 5 mills in property tax without voter approval because of the dire circumstances flooding and hurricanes constantly present in our state; perhaps in A. 4, allowing a greater use of dedicated funds—from 5% to 10%—is necessary because Louisiana does periodically face economic difficulties and, arguably, the governor needs that latitude.
We all get to decide how to vote! While we are deciding, we should remember that while the matter of taxes and taxation is often controversial, they are critical issues for a self-governing people. Oliver Wendell Holmes said that taxes are the price we pay for civilization. Daniel Webster said that the power to tax is the power to destroy. Therefore, the goal for public policy makers in Louisiana is to thread the needle and find the happy medium in between—tax rates and a tax system that doesn’t suffocate and kill the free market and Louisiana businesses but also allows for a modest and frugal local, state, and national government.
Royal Alexander is a Shreveport attorney.