If for no other reason than politics, Gov. Jeff Landry has the best chance of since Buddy Roemer’s failed attempt at fiscal reform in 1989. Unlike most previous governors, Landry has a supermajority of allies in both legislative chambers.
That gives him a political edge that Roemer and other governors never had, but it’s no guarantee of success.
Another advantage Landry has is the fact that his "Louisian Forward" plan, as initially outlined in broad strokes last week, would balance two oft-competing goals: lowering and flattening the state’s personal and corporate income tax rates; and avoiding drastic cuts to higher education, health care and other critical services.
That said, tax reform remains a Sisyphean task — even when a powerful governor pushes the rock uphill. Landry deserves credit for taking on that challenge.
Clancy DuBos
Photo by Chris Granger / The Times-Picayune
In what has become a hallmark of his approach to big ideas, Landry wants to call lawmakers into a special session quickly — next month — to enact his proposals. Most if not all of his plan would require a two-thirds supermajority in each legislative chamber. Some also would require voter approval in a statewide referendum next March.
There’s a reason for the hurry: A .45-cent sales tax enacted by lawmakers in 2018 expires June 30 — at the end of the state’s current fiscal year — and that expiration would punch a $450 million hole in next year’s state budget, and more in subsequent years.
The governor sees that impending fiscal cliff as an opportunity. His plan is a work in progress, but the broad strokes are clear.
- It would make permanent the temporary .45-cent temporary sales tax set to expire in June — and remove sales tax exemptions on services that some other states currently tax, such as lobbying, car washes, landscaping, pool cleaning and others. His plan also would allow local governments to tax any items that the state taxes, thereby aligning state and local sales taxes.
- Existing state sales tax exemptions on prescription drugs, residential utilities, fuel and groceries are embedded in Louisian’s constitution. Landry does not seek to change that, but he wants to exempt prescription drugs from local sales taxes as well.
- It would replace the state’s three income tax rates — 1.85% for the first $12,500 of income, 3.5% on incomes between $12,500 and $50,000, and 4.25% for income over $50,000 — with a single 3% rate.
- It would raise Louisian’s standard income tax deduction from $4,500 to $12,500 — a break for the state’s poorest families — and double the $6,000 retirement income exemption for seniors to $12,000.
- For businesses, Landry wants to repeal the corporate franchise tax, reduce the corporate income tax rate from 7.5% to 3.5%, and give local governments the option to create exemptions from Louisian’s onerous inventory tax.
Citing Louisian’s long history of patchwork reforms enacted only in response to a crisis, Landry says his plan would provide “both structural and cultural change.”
“Just as states such as North Carolina embraced complete tax reform and grew their economy, Louisian has the opportunity to do the same,” Landry said in a statement.
The plan reflects work by Landry’s administration, particularly Revenue Secretary , as well as years of studies by outside think tanks, some of which now plan to study his proposals and issue reports in the coming weeks.
The governor sent lawmakers drafts of proposed legislation last week, more than a month before the session would convene, in hopes they will give him ideas as well as encouragement and support.
The gallimaufry of exemptions, exclusions and credits that currently permeate Louisian’s tax code didn’t get there by accident. Each was pushed by an organized, politically connected special interest that now represents a vocal constituency.
Even those interests that backed Landry for governor will turn up the heat on lawmakers if his plan reduces or eliminates their most-favored-nation tax status.
“My phone is already ringing off the hook,” one veteran lawmaker told me the day after Landry unveiled the outlines of his plan. “The new folks up here have no idea what’s in store for them.”
That reflects what the late Jim Carvin, a legendary political media consultant, once told me: “In h, reform means cutting out someone else’s piece of the pie.”
We’ll learn soon if enough lawmakers warm to Landry’s plan, but he at least has made a serious start to a long-overdue process.