Monday, May 27, 2024

Ginn: Louisiana’s success hinges on reforming state income taxes

by BIZ Magazine

The Pelican State has tremendous opportunity and potential.

It’s got a diverse culture, renowned festivals, terrific people, and, of course, delicious food. Yet the burdensome and complicated tax code continues to hold it back from becoming what should be an economic powerhouse.

The big first step to propel the state forward should be flattening state income taxes, until ultimately eliminating them. It’s no coincidence that Florida and Texas – which have no personal income taxes – had the highest net in-migration among the states last year, while Louisiana was among the bottom 10 states with the largest net out-migration.

Taxing people’s income means taxing their success and desire to work.

People want to be where they can keep more of their hard-earned paychecks. The exodus of people from Louisiana contributes to what appears to be a low unemployment rate of 3.5%, but it would be much higher without a shrinking labor force.

Reforming taxes by first flattening them down to one bracket (Louisiana currently has three:1.85%, 3.5%, and 4.25%), with one rate until eliminating them, helps to put more money back in taxpayers’ pockets. But it also helps decentralize power from the state to the people, where it should be.

This is a big deal for Louisiana as it would improve the state’s tax structure that is currently burdening individuals to fund excessive spending, thereby reducing their opportunities to flourish.

What’s worse, often, the money taken in income tax isn’t always spent on meeting needs and addressing true priorities.

Every year, these dollars get spent on things like splash pads, sports arenas, playgrounds, museums, visitor centers, and special local projects and programs that don’t go through any sort of vetting process. And the state’s potential deficit and unfunded liabilities continue to climb, building a financial burden of more than $22.3 billion for coming generations to pay and weakening economic growth over time.

If only Louisiana had amazing results to show for its egregious spending, but it doesn’t.

The latest Census report noted that Louisiana has the country’s highest poverty rate at 17.2%, and Measure of America finds that it has the 4th highest rate of 16-24-year-olds who are neither in college nor employed. These aren’t good signs for future prosperity.

Making matters worse, half of elementary-aged public school students in Louisiana are unable to read on grade level. The state ranks low in student achievement relative to other states, as measured by the National Assessment of Educational Progress (NAEP), despite spending more per student than many states. And EdWeek’s Quality Counts Report Card gave Louisiana a D+ ranking for K-12 achievement.

Something has to give, and it shouldn’t be families and entrepreneurs.

Flattening income taxes could not only help revitalize Louisiana’s economy but also help people flourish. The benefits of such reforms can be seen in places like Texas and Florida, where people and businesses keep moving.

If Louisiana joins the state flat tax revolution, it would see a substantial influx of businesses and young people coming to take advantage.

The role of any state government should be to preserve liberty and limit its influence. Its role is not to rob its citizens via taxes to pay for excessive government spending and increase debt to an insurmountable burden.

The best step forward for Louisiana’s growth and to embrace its bright potential is passing responsible budgets, flattening income taxes, and eventually getting rid of them for good.

Vance Ginn, Ph.D., is chief economist at Pelican Institute for Public Policy. He previously served as the associate director for economic policy of the White House’s Office of Management and Budget, 2019-20.

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