In The News › Expert urges killing taxes on business

Oct 18, 2007

Source: Times-Picayune

Expert urges killing taxes on business

Expert urges killing taxes on business
Louisiana needs ‘bold’ step, he says
Thursday, October 18, 2007
By Rebecca Mowbray
Business writer

Louisiana should eliminate its corporate income tax and its corporate franchise tax to stimulate investment and the creation of jobs, a Washington, D.C., tax expert told a Bureau of Governmental Research breakfast Wednesday.

“These things would make a bold statement to the nation,” said Scott Hodge, president of the Tax Foundation, a nonprofit tax research group.

The nonpartisan Bureau of Governmental Research does not necessarily endorse the views of its speakers. Janet Howard, the group’s president, said BGR invited Hodge to speak because her group would like to convene a discussion about how to create a rational tax policy because it is an immediate tool the state could use to develop its economy, unlike investments in education, for example, which take a generation to bear fruit.

The United States is falling behind globally, Hodge said, because it has the second-highest corporate tax rate of any industrialized nation, while pioneers such as Ireland, Slovakia, Singapore, Malaysia and Estonia have had remarkable results with stimulating investment and economic development with low-tax burdens on corporations.

Corporate tax rates matter, Hodge said, because individuals pay higher prices, workers earn lower wages, and shareholders see lower returns when such taxes are too high.

But while many people worry about outsourcing and globalization, Hodge said, they should be more worried about competition within the United States because it’s easy for companies to move. “You have more to fear from Indiana than India,” Hodge said.

The pressure is especially keen on Louisiana because it is surrounded by low-tax states, Hodge said.

Creating a rational tax policy rewards businesses that are already here and indicates a healthy business climate, while special tax breaks to lure a manufacturing plant, for example, ultimately zap the economy of energy, Hodge said.

Special tax breaks say, “ ‘We have such a bad tax system that we have to bribe you to come into our state,’ “ Hodge said. “We should not be using taxpayer dollars to play investment banker. The key to a prosperous economy is a level playing field.”

Hodge said he would eliminate the state corporate income tax because Louisiana’s rate of 8 percent is higher than that of neighboring states, yet it brings in only 5 percent of the state’s budget. Similarly, he would eliminate the corporate franchise tax because it generates only 2.5 percent of the state budget and probably wouldn’t be missed.

By the Tax Foundation’s measure, Louisiana’s business tax climate ranks 32nd out of the 50 states.

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Rebecca Mowbray can be reached at rmowbray@timespicayune.com or (504) 826-3417.

Oct 18, 2007

Source: Times-Picayune

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