Louisiana's business tax climate ranks 44th in the country, according to a new report released by the Washington, D.C.-based think tank, the Tax Foundation.
The Tax Foundation’s State Business Tax Climate Index was produced to “enable business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare,” it states. “While there are many ways to show how much is collected in taxes by state governments, the Index is designed to show how well states structure their tax systems and provides a road map for improvement.”
The categories evaluated include states’ tax structures for sales, corporate, individual, property, and unemployment insurance taxes. Louisiana ranked 44th overall, the same as it did last year.
Louisiana ranked 36th for corporate taxes, 32nd for both individual and property taxes, and fourth for unemployment insurance taxes.
“Though the state’s sales tax rate has edged down, a convoluted tax code with high rates still has the state low on the rankings,” the Tax Foundation reports. Louisiana has the highest combined state and local sales taxes in the nation.
For businesses, Louisiana's top corporate tax rate is 8 percent, placing the state in 42nd place for its business tax climate.
For individuals, the top individual income tax rate stands at 6 percent, with $639 state and local individual income tax collections per capita. Its state and local tax burden is 7.6 percent.
The state’s 5 percent sales tax ranks the state 33rd, but combined with average local sales tax rates, Louisiana’s average 10.02 percent is the highest among the 45 states and the District of Columbia that collect statewide sales taxes.
According to the metrics used, the foundation reports that states’ scores can rise or fall depending on reforms made by other states or by a state’s own policies. The Index reflects rewards and penalties based on a state’s transparency and neutral tax codes, and for having tax codes that are burdensome, complex and economically harmful.
In previous years, the foundation ranked Louisiana’s overall tax environment for businesses 33rd in 2014, 35th in 2015, 36th in 2016 and 41st in 2017.
Critics note that Gov. John Bel Edwards’ claim this May that the state’s tax burden was ranked fifth lowest in America was misleading. He was citing a 2012 Tax Foundation Index report, which used different metrics to compare states’ overall tax climates. The 2019 Index compares states’ business tax climates.
"It is no secret that Louisiana's complex, unpredictable tax system is discouraging for both job creators and workers around the state," Pelican Institute CEO Daniel Erspamer told Watchdog.org. "Louisiana must make some necessary reforms to its tax code, if we truly want to encourage job growth and entrepreneurship. A fairer, flatter and more predictable tax system will make Louisiana a place where quality jobs and opportunity flourish for everyone."
The Tax Foundation hasn’t produced a state and local tax burden study since 2012. The personal-finance website, WalletHub, released its comparison of states’ tax burdens earlier this year, ranking Louisiana 27th.
The absence of a major tax is a common factor among many of the top 10 states. Property taxes and unemployment insurance taxes are levied in every state, but some do not have one or more of the corporate income tax, the individual income tax, or the sales tax, the foundation notes. The top ten ranked states with the best tax environments for businesses are Wyoming, Alaska, South Dakota, Florida, Montana, New Hampshire, Oregon, Utah, Nevada, and Indiana.
The high ranking for Wyoming, Nevada, and South Dakota, the report indicates, is due to these states having no corporate or individual income taxes, although Nevada has a gross receipts tax. Alaska has no individual income or state-level sales tax; Florida has no individual income tax; and New Hampshire, Montana, and Oregon have no sales tax.
How states structure taxes can also impact rankings, the report notes. Indiana and Utah, which levy all of the major taxes, “do so with low rates on broad bases.”
The bottom ten states “have complex, non-neutral taxes with comparatively high rates,” it states. They are Ohio, Minnesota, Louisiana, Iowa, Arkansas, Washington, D.C., Connecticut, New York, California, and New Jersey.
New Jersey has some of the highest property taxes in the country. It recently implemented the second highest-rate corporate income tax in the country, levied an inheritance tax, and maintains some of the worst-structured individual income taxes in the U.S., the foundation reports.