Could enacting a flat tax forestall a larger tax cut and avoid a fiscal cliff for Louisiana? That is the apparent behind-the-scenes logic in the recent proposal put forward by the Landry administration last month, which Hy & Christopher explore on this week’s radio show.

We also talk to Gary Mason of the Monumental Task Committee of the recent attempts to clean the Martin Luther King and Rev. Avery Alexander statues, as well as put up a new monument to the First World War soldiers. They are having a fundraiser raffling off Taylor Swift concert tickets— at better odds of winning than everyone else— at their website.

We then move onto discussing the proposed LA Flat Tax. As Christopher Tidmore writes in the Louisiana Weekly:

Quite a few observers were surprised when the governor’s revenue secretary, Richard Nelson, proposed the creation of a Louisiana flat income tax rate of 3.8 percent in the midst of a looming fiscal crisis next year. The increased revenue would allow Louisiana to cover the loss of the $455 million in revenue produced from .45 percent sales tax expiring next year – at least if he also convinces the legislature to eliminate nearly every tax benefit which goes to the cultural economy as well as the “Quality Jobs” program aiding industrial economic development.

Now it appears that Landry’s flat tax proposal also serves a way to ward off an almost equally large income tax cut – instituted by the previous administration. A 2021 state law created a series of conditions, which when met would automatically reduce income tax rates “by multiplying each current rate by the difference between one and the percentage change in individual income tax collections in excess of the individual income tax collections for Fiscal Year 2018-2019 adjusted annually.”

In layman’s terms, existing state law mandates an across-the-board income tax cut of approximately $200-$400 million (depending upon how the formula is calculated), and that would be on top of the automatic sales tax reduction – for an approximate $800-million deficit. This unforeseen tax cut came about because the circumstances which required fully funding the rainy day fund, earning a certain percentage increase in tax revenue, and other specific factors seemed incredibly unlikely to occur in 2021. In other words, the legislature passed a tax cut that they never thought would happen!

However, Louisiana – for just one year – hit all of the unlikely fiscal qualifications requiring an automatic tax cut. Landry has been scrambling to offer another alternative, proposing a tax cut which would not blow a hole in 2025 budgetary revenues. His answer is to create a flat tax, and simultaneously, get rid of every business tax incentive program. In other words, kill the film, music, live performance, digital, economic development and other tax credit benefits as well as the Quality Jobs program—which gives tax subsidies to companies who invest in Louisiana.  Collectively, these programs cost the state about $1 billion a year (but keep our cultural economy alive as well).

Through this method, Landry can cut the overall income tax rate even more than the 2021 law mandates, and at the same time allow the sales tax cut to occur. The cultural economy corporate community, from filmmakers to the music industry (who are not fans of Landry in the first place), pay the brunt of the bill – along with certain elements of the L.A.B.I. corporate/chemical/industrial community (who generally supported his GOP opponent Stephen Waguespack and depend upon the Quality Jobs credit). 

Louisiana’s poorest citizens would do better under Landry’s Flat Income Tax proposal than the across-the-board tax cut, with the first $12,500 of incomes completely eliminated from taxes instead of a fraction cut off from the current 1.85 percent income tax rate. The regressive .45 percent emergency sales tax, which was instituted eight years ago, would be allowed to expire under his plan as well.

The richest Louisianans would see income taxes fall from 4.25 percent to 3.8 percent. Those making between $12,500 and $50,000 would see an increase from 3.5 percent to 3.8 percent. With the elimination of the tax incentives and the increase on the working-class, the Louisiana budget would approach balance, and Pelican State would fall near the bottom of the list in top income tax rates levied on a state-by-state basis, ahead of only Indiana and Pennsylvania. (Neighbors Texas, Florida, and Tennessee as well as Alaska, Nevada, South Dakota, Washington and Wyoming levy no state income tax.)

Gov. Landry is expected to call a special session of the Louisiana Legislature in November to deal with tax reform and fiscal matters.