All road lead to Baton Rouge; state’s archaic tax structure paves the way

Imagine a pi“ata hanging from the ceiling. Imagine individuals swinging wildly at the treasures in the ornate paper machÈ container. Imagine a solid hit followed by a mad, bruising scramble on the floor as everyone at the party fights for his share of the toys and candy.

The pi“ata analogy describes not only the “food fight” that may develop in the current legislative session, it also is symptomatic of a major flaw in the method by which governmental services are delivered in Louisiana.

Individuals who reside in other states but do business in Louisiana often comment on how everyone in the Bayou State tends to come to the state government in Baton Rouge to address their wants and needs. Those outsiders ponder why more services are not undertaken by local governments instead of the state.

Louisiana’s archaic tax structure is the reason why all roads lead to Baton Rouge when questions of money for public services arise.

The state of Louisiana does not impose a property tax. It reserves that venue of taxation for local governments. Unfortunately, years ago the state imposed a very high homestead exemption on residential property, and then later raised it even higher. The effect has been to limit the property tax base available to local governments when millages are successfully imposed. That results in the property tax being primarily a tax on business and commercial interests.

Our highest-in-the-nation homestead exemption dampens local governments’ ability to generate sufficient local funding for roads, teacher salaries, fire and police protection, and other governmental services.

The current legislative session puts the flaws in our tax structure into clear focus. Legislation has been introduced to capture certain state revenues and set them aside for local governments to use to build and maintain roads. Other bills are designed to increase school personnel salaries and the “supplemental pay” that Louisiana (again, alone in the nation) gives to local public safety employees.

Whenever local fiscal needs surface, the first place local governments look toward is the Daddy Warbucks of state government in Baton Rouge.

Interestingly, at a time when the biggest money grab of all time is going on at the state Capitol, a few legislators are trying to make our highly flawed tax structure even worse. Several bills have been filed to increase the homestead exemption from $75,000 to $150,000. The effect would be to make local governments even more dependent on Baton Rouge, as well as putting more pressure on them to drive sales tax rates even higher.

The state is a huge collector of sales taxes in its own right. Sales taxes are not as deductible on federal income tax returns as are property taxes. So, our convoluted tax structure not only penalizes cash-starved local governments; it works against the taxpayers as well.

The last thing the Legislature needs to do this session is to increase the homestead exemption. More dollars need to exist at the local level to fund local governmental needs. The more that local dollars remain at home, the more state dollars can be used to fund true state needs such as post-secondary education and state highways.

Yes, there is going to be one big, ugly “food fight” in Baton Rouge for the next two months. As that battle for state bucks for many local needs develops, keep in mind our flawed tax structure that exacerbates the problem. And keep an eye on those who would make it even worse by significantly increasing the homestead exemption.