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Louisiana Tax Reform

In: Business and Management

Submitted By gsartor
Words 2399
Pages 10
Louisiana Tax Reform:
Eliminating Corporate and Franchise Taxes

The relationship between tax policies and economic growth is a topic that has been frequently debated. For decades, economists have developed studies exploring this relationship and analyzing its effects. These studies concluded that a negative relationship exists between taxes and economic growth. Taxes have a negative impact on economic growth because of how they influence the activities individuals and firms choose to engage in. Businesses and individuals often base their decisions on the overall tax burden, which creates a disincentive to engage in activities taxed at a higher rate. The Tax Foundation evaluates each state’s business tax climate every year in order to indicate which states’ tax systems are the most attractive to business and economic growth. According to the Tax Foundation’s 2013 State Business Tax Climate Index, Louisiana’s tax system is currently ranked 32nd, far below the rankings of progressive southern states such as Florida and Texas. In addition, Louisiana’s tax structure is poorly perceived because of its complexity. Therefore, in order to create a competitive advantage, the Louisiana tax system must be reformed. Several of the states that rank highest in the 2013 State Business Tax Climate Index do not levy a tax on corporations. Furthermore, the average annual growth rates for those states without a corporate income tax exceeded the growth rate of all other states over the ten-year period between 1992-2002. These statistics indicate how relevant a state’s corporate tax structure is to a business’ investment decisions and the level of economic activity. Therefore, Louisiana should eliminate the corporate tax when reforming its current tax system. Several academics and economists have researched and studied the relationship between taxes and...

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