Amount of Louisiana's Tax Exemptions Increased Since 2010;
More Comprehensive Review process is Needed
An informational report released by the Legislative Auditor today provides a look at the state’s major tax revenues and tax exemptions. Louisiana assesses 40 different taxes from which the state expected to collect about $7.5 billion in fiscal year 2015. Most of that revenue comes from individual income, sales, severance, petroleum products, and corporate income and corporate franchise taxes.
In contrast, the state has 464 tax exemptions, which were expected to total more than $7.9 billion in fiscal year 2015. Of the 464 exemptions, the vast majority – 399 – are related to the individual income, sales, severance, petroleum products, and corporate income and corporate franchise taxes. According to the state auditor’s report, tax exemptions have grown every year since fiscal year 2010 and were projected to exceed tax revenue in fiscal year 2015 by more than $400 million.
Louisiana also does not have a comprehensive review process in place to keep track of its tax exemptions. While state law requires information on certain exemptions to be reported by the agencies involved and legislators to review that information, the provisions do not cover all tax exemptions or provide specific criteria for how to review exemptions, and are not always followed.
In addition, of the 464 tax exemptions, only 52 have sunset provisions. Sunset provisions set a specific time for legislation to expire unless lawmakers take action beforehand. That means most of Louisiana’s exemptions essentially continue on automatic pilot.
As the Legislature continues to look for money to make up the state’s budget shortfalls, it is important for lawmakers to have a systematic and robust review process for reviewing tax exemptions. Among the actions legislators could consider taking: