The constant fiscal crises in Baton Rouge have affected governments throughout the state—64 parishes and sheriffs, 300 municipalities, 70 school boards, and other special districts. Our Constitution centralizes too much control with the state legislature in ways that preclude parishes from managing their own affairs. As part of constitutional reforms, state government should remove the strings from local authorities, giving them more flexibility to provide services at the local level and enhancing accountability at all levels of government.
Louisiana has a spending problem—one caused in large part by a governance problem.
Local and state government in Louisiana have a dysfunctional relationship, one in which each infringes on the autonomy of the other.
Local governments spend much time and energy collecting revenues for the state— a task more efficiently accomplished at the state level — even as they lack the full power to manage the revenue they collect, due to state-imposed restrictions.
The Louisiana Constitution requires state government to fund the pay supplements of law enforcement and fire protection officers—which encourages parishes to shift their fire and police costs on to state government.
In recent years, parishes have assessed a tax on business inventory, and the state has provided a refundable tax credit to businesses reimbursing them for this tax. However, the credit has encouraged parishes to increase inventory assessments of businesses to maximize their subsidies from the state, indirectly funneled through businesses via the credit.
The state homestead exemption and the Industrial Tax Exemption Program (ITEP) unduly limit parishes’ ability to raise revenue.
Legislative approval of local sales tax rates limits local governments’ autonomy over their finances.
The centralized tax administration is fostering inefficiencies for retailers and businesses and is adding further confusion to an already-complex system.
Eliminate the constitutional provisions on supplemental pay. If parishes wish to increase fire and police salaries and services, they should have the freedom to do so—but should also pay for those services themselves.
Repeal the $90 million revenue sharing fund, which is a subsidy for local government.
Repeal the refundable inventory tax credit, and start the process for repealing parishes’ authority to assess inventory taxes.
Examine other sources of local government funding, with an eye towards phasing out or eliminating as many of these indirect subsidies as possible.
Propose a constitutional amendment repealing the $75,000 property tax homestead exemption, which results in many homeowners paying no property tax at all. If parishes wish to retain a homestead exemption on the local level, they should have the power to do so.
Reform provisions that automatically adjust millage rates following a re-assessment of property values.
Repeal the requirement for legislative approval of a local tax referendum. If the voters of a particular authority wish to approve a sales tax increase, state lawmakers who reside in other parishes should have little reason to object, or intervene.
Re-examine ITEP. If parishes wish to offer companies property tax incentives, they should have the right to do so. But state government eroding parishes’ tax base unilaterally raises larger issues that the Legislature should consider carefully when determining the relationship between municipalities and state government.
Reduce overall sales tax rates by at least one percentage point, to 3.45%, and ideally as low as 3%. Lawmakers can do so by eliminating some existing tax exemptions, and/or applying the sales tax to professional services or other items, to lower rates overall.
Apply legislative expansion of the state sales tax base to parishes as well, creating a uniform tax base throughout Louisiana and allowing parishes to lower their sales tax rates.
Create a single system of state and local sales tax collection and auditing, which would reduce administrative costs for government and businesses.