Gov. John Bel Edwards (D-La.) is beginning his first term as governor by slamming taxpayers with a smorgasbord of tax hikes in order to close the Pelican State’s projected $700 million shortfall by June 2016. Nine of the tax increases proposed by Gov. Edwards, which are listed below, would directly hit consumers and five of them would take effect as soon as April 1st:
- Personal Income Taxes- it would apply to income earned in 2016
- Sales Taxes- increases from 4 cents a dollar to 5 cents
- Tobacco Tax- the tobacco tax would go from 86 cents per pack to $1.08 per pack
- Alcohol Tax- to be determined
- Telephone Taxes- jumps from 2-3 percent tax to 5 percent
- Federal Tax Deductions- elimination of state tax credit for 100 percent of their charitable contributions and mortgage interest payments and replaced by a tax credit that covers 50 percent of those expenses
- Short-term Rental and Online Travel Services Tax- The existing tax on hotel rooms would extend to short-term rental services. It varies across the state, but in New Orleans it’s 13 percent.
- Rental Car Tax- 3 percent tax
- Internet Sales Tax- normal sales tax rates put in place by the local government where you make your purchase would apply
Many of the tax hikes proposed disproportionately harm low-income families who can least afford it, small businesses that are the engine of job creation, and would make state revenues more volatile. Take the tobacco tax increase put forward by Gov. Edwards. Not only do cigarette taxes disproportionately burden low income resident, as the average income of smokers is far below that of the general populace, tobacco taxes are a unstable and decline source of revenue. Increasing the state’s reliance on tobacco tax revenues will only make budgeting more difficult and will likely set the stage for further tax hikes down the road, as revenue projections are missed. Only three out of the 32 state tobacco tax increases passed between 2009 and 2013 have met or surpassed initial revenue projections.
In addition to looting Louisiana taxpayer for more of their hard-earned income, Gov. Edwards also wants to export the tax burden to tourists and travelers by imposing an online travel services tax and rental car tax hike. In a state that relies heavily on tourism, these taxes would have a noxious impact on the Louisiana economy. Research demonstrates that online travel companies increase direct business for hotels, which subsequently boosts commerce for local businesses. Cornell University’s Center for Hospitality Research found that hotels showcased on an online travel site saw a 7.5 to 26 percent increase in direct bookings not made through a third party. Imposing higher taxes on those who utilize online travel agents will deter some potential tourists from visiting the Pelican State.
Gov. Edwards belief that his proposed rental car tax hike would only hit out-of-state visitor is belied by the facts. Given the rental car industry’s primary business deals with replacement vehicles, a majority of the rental car tax hike would be endured by Louisianans. Studies also indicate that rental car tax hikes negatively impact the local economy. A study commissioned by the National Business Travel Association found that a rise in rental car taxes are associated with a reduction in the number of patrons and the average number of days rented, as tourists tend to offset the increased cost of their rental by walking, using public transportation, or by choosing to dine out less.
According to Governor Edwards his proposal is not a budget plan that he wanted to unveil in his second week of office. But he did it anyway.
“This is not the budget plan I wanted to bring in my second week in office, but these problems are bigger than our state has ever seen,” Edwards said. “Raising taxes would not be my first, second or even third option when seeking to fill the state’s budget shortfall, but when the facts change, so do your options.”
That Gov. Edwards has begun his tenure by proposal a massive tax increase should come as no surprise to those who were familiar with his record in the state legislature. As ATR’s Patrick Gleason pointed out in Forbes shortly after Edwards election, Louisiana taxpayers are looking at a rough next four years. After being hit with over 20 federal tax increase in just the last six years, the last thing Louisianans need are for legislators in Baton Rouge to pile on with more job-killing tax hikes at the state level.