In March 2016, the Louisiana Legislature set into motion a comprehensive review of Louisiana’s budget and tax structure with the passage of House Concurrent Resolution No. 11 (HCR 11) in an effort to create a balanced structure providing for greater budget stability and inhibiting the practices that led to mid-year deficits over the last eight years. HCR 11 formed the 13-member Louisiana Department of Revenue Task Force on Structural Changes in Budget and Tax Policy in order to gather research and present recommendations. Adams and Reese Baton Rouge Partner V. Thomas “Tom” Clark was appointed by Gov. John Bel Edwards as his sole designee to the Task Force.
Over the past six months, the Task Force compiled research, received testimony and submissions, and engaged in substantial deliberations that led to the formation of a comprehensive set of recommendations relating to sales tax, individual income tax, corporate income tax and franchise tax, property tax, budgeting, spending and economic incentives.
Below is a summary of the Task Force’s recommendations, released Nov. 2. The recommendations are designed to create a more stable and predictable fiscal structure for Louisiana while sourcing a means by which local governments can become better positioned to address their financial needs without dependence upon the state's prior fiscal or legislative approval. The items will be seen in the 2017 Regular Legislative Session.
- BUDGET: - The Task Force recommends that the Legislature constrain spending to recurring revenues, utilize revenue and spending forecasting, and continue to review all state contracts for consolidation, renegotiation and elimination. By adhering to these practices, the structure of the budget will be more resilient to alterations in revenue flow.
- SALES TAX: - The Task Force identified the need for both state and local governments to implement a uniform system of tax collection, administration and audit. Additionally, they recommend that the state sales tax rate be at most 4 percent, and that local government be granted the authority to increase their sales tax rate without legislative approval.
- INDIVIDUAL INCOME TAX: - The Task Force provided two options by which their recommendation to eliminate the state deduction for federal income taxes paid could be fulfilled. Both options would create a new 3-tiered income tax structure.
- CORPORATE INCOME TAX: - Constitutional Amendment No. 3 on the Nov. 8 ballot received full support from the Task Force. If passed, the amendment will abolish the deduction on corporate income taxes for federal taxes paid and create a 6.5 percent flat corporate tax rate.
- AD VALOREM TAX: - In regard to the Industrial Tax Exemption Program (ITEP), the Task Force recommends a constitutional amendment to bring local governments into the application process. Furthermore, they recommend expanding the use of Payment In Lieu Of Tax (PILOT) programs.
- INCENTIVES: - The Task Force recommends that the Louisiana Department of Economic Development create sunset review periods for all incentive programs. They also recommended more changes to the Motion Picture Investor Tax Credit Program, including the elimination of the back end cap.
The Task Force on Structural Changes in Budget and Tax Policy recommendations are predicted to be introduced as multiple measures of legislation in the upcoming 2017 Regular Session.