What can Louisiana do to reform what many consider to be one of the most complex tax systems in the country? Three state legislators and the secretary of the state Department of Revenue tried to answer that question during a one-hour webinar sponsored by the Public Affairs Research Council of Louisiana.

Richard Nelson, the revenue secretary, talked about tax reform plans he has been discussing since he took office in January and when he was a Republican state representative from Mandeville who dropped out of a race for governor in 2023.

One idea is to remove constitutional exemptions for state sales taxes on food bought for home consumption, residential utilities and prescription medicine. Those exemptions totaled $584 million last fiscal year, and that would be enough to erase an expected deficit next July when a 0.45% state sales tax increase and a 2% tax on business utilities go off the books.

Republican state Sen. Beth Mizell of Franklinton, a member of the Senate Committee on Revenue and Fiscal Affairs that handles tax matters, said during the webinar that “everything needs to be on the table” if legislators hold a special session next year on tax reform.

State Rep. Julie Emerson, chairperson of the House Ways and Means Committee that handles tax matters, said changing those food and other sales tax exemptions would be difficult. She said it takes a two-thirds vote in the Legislature and approval by the voting public to change the constitution.

The late-Rep. Vic Stelly of Moss Bluff sponsored the 2002 tax reform plan that increased income taxes to make up for revenues lost by those exempted sales taxes. He made it possible for legislators to change the income taxes, but he put the sales tax exemptions in the state constitution, knowing it would be difficult to change.

Passage of Stelly’s tax plan was a rare example of successful Louisiana tax reform. Unfortunately, Republican lawmakers complained about the higher income taxes and they lowered them in 2008. However, those exemptions are still in the constitution. And state Rep. Matthew Willard of New Orleans, chairman of the House Democratic Caucus, said during the webinar they are going to stay there.

Previously, Nelson wanted to eliminate the state’s income taxes but now recommends lowering them as a first step. Current individual income tax brackets range from 1.85% for the lowest earners to 4.25% for anyone making more than $50,000 annually. Nelson would consolidate those to a flat 3.5% rate.

Additional revenues to replace some of those that would be lost would be possible by levying sales taxes on services such as landscaping, car washes and pet grooming. Nelson said wealthier taxpayers would be most affected by doing that.

Then, there are the almost annual unsuccessful efforts to end a number of sales and income tax exemptions.

The state Department of Revenue’s analysis of tax collections and exemptions for fiscal year 2021-22, the latest figures available, show that individual income taxes produced $4.5 billion in revenue. However, another $2.1 billion was the total of estimated exemptions that year.

Sales taxes collected in 2021-22 totaled over $4.3 billion but there were $2.9 billion in sales tax exemptions.

Mizell said doing away with some of those exemptions would be a test for new legislators. She said radical tax changes need to be made and legislators should see what other states are doing. There has to be a little pain across the board, she said.

“Whatever it takes to move that needle,” she said.

Willard said he wants to see what might be on the agenda for a tax reform session before deciding whether it’s a good idea. He also wants to see what budget cuts might be made in order to raise new revenues.

A stable tax system isn’t the only thing new businesses and industries look for when moving to a state, Willard said. He mentioned education, infrastructure (roads and bridges), maintenance at colleges and universities, which is billions of dollars behind in Louisiana, and the cost of property and vehicle insurance.

Nelson said for tax reform to take place “everybody wins and loses at the same time.”

Louisiana could definitely use some tax reform, but the courage it takes to do it has always been an extremely tough sell.

Jim Beam, the retired editor of the American Press, has covered people and politics for more than six decades. Contact him at 337-515-8871 or jim.beam.press@gmail.com.