Thursday, May 30, 2024

Analysis of Louisiana’s tax structure could guide lawmakers seeking changes

by BIZ Magazine

(The Center Square) — The Louisiana Legislative Auditor issued a report Tuesday comparing tax structures in Louisiana with other states for lawmakers considering changes in the 2023 legislative session.

The report was spawned by House Resolution 178 from the 2022 Regular Legislative Session to provide information to the House Ways and Means Committee studying Louisiana’s tax structure.

The analysis shows Louisiana is one of 42 states including the District of Columbia that impose an individual income tax and one of 46 that levy a corporation income tax. Combined, those taxes accounted for 35.5% of the $14.4 billion in taxes, licenses and fees included in the state’s official revenue forecast for fiscal year 2022, with $4.4 billion from the individual income tax and $672.8 million from the corporate income tax.

“Louisiana’s $5.1 billion in IIT and CIT revenues in FY 2022 represented 60% of the potential $8.5 billion in potential revenues from these sources, before accounting for $3.4 billion in exemptions, deductions, credits, abatements and rebates,” auditors wrote.

Louisiana’s individual income and corporate income taxes accounted for 15.3% of state and local general revenues in fiscal year 2019, after excluding hospital revenues.

“Without the IIT and CIT, Louisiana would go from the sixteenth-lowest to the second-lowest among states in terms of state and local government revenues as a percentage of personal income,” according to the report.

The LLA found states without individual income taxes rely more on sales taxes, but generally receive less revenue overall as a percentage of personal income. The average revenues as a percentage of personal income in states without individual income taxes is 11.8%, compared to an average of 14.1% in states with income taxes, the LLA reports.

The report also noted Louisiana has relatively low property taxes and relatively high sales taxes, ranked 46th and 5th among states respectively.

“In both cases, Louisiana’s status as an outlier is driven by its local governments, which had the second highest sales taxes as a percentage of personal income (ranked behind the District of Columbia) and had the 42nd lowest property taxes in fiscal year 2019,” according to the LLA. “Louisiana’s state sales tax collections of 1.7% of personal income in FY 2019 put the state in 30th place among states and were below the national average of 1.8% and only 0.1 percentage points above the average for IIT states of 1.6%.”

State governments that levy IIT take a larger share of state and local revenues than states without IITs — 57.2% versus 50.2% — with Louisiana state government taking 57.3%, or the 35th highest percentage among states, according to the report.

The LLA also found local governments in Louisiana are less reliant on the state for financial support than local governments in states with individual income taxes and were roughly the same pre-pandemic as in states without income taxes.

“In fiscal year 2019, the 42 states with IITs provided 31.9% of the general revenues received by their local governments on average, versus 31.9% in the nine states without IITs,” the report read. “Louisiana local governments received 25.9% of their general revenues from state-to-local-government transfers, putting Louisiana in line with states without IITs.”

The LLA report also included a detailed breakdown of tax revenues in 10 states: Alaska, Florida, Louisiana, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.

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