SPECIAL SESSIONS

Tax Proposals

SCENARIO I
A 0.25% increase in sales tax
The sale tax hike sunsets on July 1, 2018, returning to 4% for general sales. One proposal calls for
increasing the sales tax by 0.25% to help offset the budget deficit. However, as can be seen in the table
below, this small increase negatively affects employment in the form of 1,400 lost full-time jobs and lowers
GDP by $86 million in the first year.

BASELINE DIFFERENCE FROM BASELINE

Year GDP Employment Tax Revenues GDP Employment Tax Revenues

2018 219,804 2,076,400 9,086 -86 -1,400 164

2019 223,283 2,093,900 9,230 -108 -1,500 166
2020 226,818 2,111,600 9,376 -112 -1,500 169
2021 230,408 2,129,500 9,524 -114 -1,400 171
2022 234,055 2,147,500 9,675 -116 -1,400 174
2023 237,759 2,165,600 9,828 -118 -1,400 176
2024 241,522 2,183,900 9,984 -120 -1,400 179
2025 245,345 2,202,400 10,142 -122 -1,400 181

Note:
GDP and tax revenues in millions of 2009$.
Employment in units of full-time equivalent non-farm jobs, rounded to the nearest hundred.

BASELINE DIFFERENCE FROM BASELINE

Year GDP Employment Tax Revenues GDP Employment Tax Revenues

2018 219,804 2,076,400 9,086 -173 -2,800 329

2019 223,283 2,093,900 9,230 -216 -2,900 332
2020 226,818 2,111,600 9,376 -223 -2,900 337
2021 230,408 2,129,500 9,524 -227 -2,900 342
2022 234,055 2,147,500 9,675 -231 -2,900 347
2023 237,759 2,165,600 9,828 -235 -2,900 352
2024 241,522 2,183,900 9,984 -239 -2,800 357
2025 245,345 2,202,400 10,142 -243 -2,800 363

BASELINE DIFFERENCE FROM BASELINE

Year GDP Employment Tax Revenues GDP Employment Tax Revenues 1

2018 219,804 2,076,400 9,086 -191 -2,600 190

2019 223,283 2,093,900 9,230 -306 -2,800 190
 BASELINE DIFFERENCE FROM BASELINE

Year GDP Employment Tax Revenues GDP Employment Tax Revenues

2018 219,804 2,076,400 9,086 -86 -1,400 164

2019 223,283 2,093,900 9,230 -108 -1,500 166

SCENARIO
2020
2021
226,818
230,408
II 2,111,600
2,129,500
9,376
9,524
-112
-114
-1,500
-1,400
169
171
A2022
0.5%234,055
increase in sales9,675
2,147,500 tax -116 -1,400 174
2023 237,759 2,165,600 9,828 -118 -1,400 176
Along the same lines as the first proposal, a 0.5% sales tax increase is thought to help lower the budget
deficit. 241,522
2024 In this case, doubling2,183,900 9,984
the tax increase doubles -120 impact. The
the negative -1,400 179
table below shows
employment
2025 falling
245,345by 2,800 and GDP decreasing
2,202,400 10,142by $173 million in the first year.
-122 -1,400 181

BASELINE DIFFERENCE FROM BASELINE

Year GDP Employment Tax Revenues GDP Employment Tax Revenues

2018 219,804 2,076,400 9,086 -173 -2,800 329

2019 223,283 2,093,900 9,230 -216 -2,900 332
2020 226,818 2,111,600 9,376 -223 -2,900 337
2021 230,408 2,129,500 9,524 -227 -2,900 342
2022 234,055 2,147,500 9,675 -231 -2,900 347
2023 237,759 2,165,600 9,828 -235 -2,900 352
2024 241,522 2,183,900 9,984 -239 -2,800 357
2025 245,345 2,202,400 10,142 -243 -2,800 363

Note:
GDP and tax revenues in millions of 2009$.
Employment in units of full-time equivalent non-farm jobs, rounded to the nearest hundred.
BASELINE DIFFERENCE FROM BASELINE

Year GDP Employment Tax Revenues GDP Employment Tax Revenues

2018 219,804 2,076,400 9,086 -191 -2,600 190

2019 223,283 2,093,900 9,230 -306 -2,800 190
2020 226,818 2,111,600 9,376 -325 -2,700 191
2021 230,408 2,129,500 9,524 -333 -2,600 193
2022 234,055 2,147,500 9,675 -340 -2,600 195
2023 237,759 2,165,600 9,828 -347 -2,500 197
2024 241,522 2,183,900 9,984 -354 -2,400 199
2025 245,345 2,202,400 10,142 -361 -2,400 201

BASELINE DIFFERENCE FROM BASELINE

Year GDP Employment Tax Revenues GDP Employment Tax Revenues

2018 219,804 2,076,400 9,086 -56 -700 56

2019 223,283 2,093,900 9,230 -89 -700 56
2020 226,818 2,111,600 9,376 -95 -700 57
2021 230,408 2,129,500 9,524 -97 -700 57
2022 234,055 2,147,500 9,675 -99 -600 58
2023 237,759 2,165,600 9,828 -101 -600 59
2024 241,522 2,183,900 9,984 -103 -600 59
2 2025 245,345 2,202,400 10,142 -105 -600 60
 2022 234,055 2,147,500 9,675 -116 -1,400 174
2023 237,759 2,165,600 9,828 -118 -1,400 176
2024 241,522 2,183,900 9,984 -120 -1,400 179
2025 245,345 2,202,400 10,142 -122 -1,400 181

SCENARIO III
Income Bracket Shifting
BASELINE DIFFERENCE FROM BASELINE

Year idea that

Another GDP
has beenEmployment Tax
suggested is to Revenues
raise GDP
revenue by adjusting theEmployment Taxincome
current individual Revenues
tax
system. Currently, Louisiana has a progressive income tax where a taxpayer pays 2% on their first $12,500,
4%2018
on income219,804
between $12,500 and $50,000,9,086
2,076,400 -173 over $50,000.
and 6% on all income -2,800 Under the proposed
329
tax bracket change, a taxpayer would pay 2% on their first $12,500, 4% on income between $12,500
2019 223,283 2,093,900 9,230 -216 -2,900 332 and
$25,000,
2020 and 226,818
would pay 6%2,111,600
on all income over $25,000.
9,376 -223 -2,900 337
2021 230,408 2,129,500 9,524 -227 -2,900 342
All else equal, shifting the top two income brackets increases the marginal tax rate faced by the middle-
class 234,055
2022as well as increasing the2,147,500
effective tax rate for a majority of-231
9,675 -2,900
workers. Using 347 general
a macroeconomic
2023 237,759 2,165,600 9,828 -235 -2,900 352
equilibrium model calibrated to Louisiana’s economy, we find that changing the income tax brackets based
on2024
the above 241,522
described policy would decrease
2,183,900 GDP by $191 million
9,984 -239 and lower-2,800
expected employment
357 by
2,600
2025
jobs in the first
245,345
year, while increasing
2,202,400
tax revenues
10,142
by only $190
-243
million.
-2,800 363

BASELINE DIFFERENCE FROM BASELINE

Year GDP Employment Tax Revenues GDP Employment Tax Revenues

2018 219,804 2,076,400 9,086 -191 -2,600 190

2019 223,283 2,093,900 9,230 -306 -2,800 190
2020 226,818 2,111,600 9,376 -325 -2,700 191
2021 230,408 2,129,500 9,524 -333 -2,600 193
2022 234,055 2,147,500 9,675 -340 -2,600 195
2023 237,759 2,165,600 9,828 -347 -2,500 197
2024 241,522 2,183,900 9,984 -354 -2,400 199
2025 245,345 2,202,400 10,142 -361 -2,400 201

Note:
GDP and tax revenues in millions of 2009$.
BASELINE
Employment in units of full-time equivalent non-farm jobs, rounded to the nearest hundred. DIFFERENCE FROM BASELINE

Year GDP Employment Tax Revenues GDP Employment Tax Revenues

2018 219,804 2,076,400 9,086 -56 -700 56

2019 223,283 2,093,900 9,230 -89 -700 56
2020 226,818 2,111,600 9,376 -95 -700 57
2021 230,408 2,129,500 9,524 -97 -700 57
2022 234,055 2,147,500 9,675 -99 -600 58
2023 237,759 2,165,600 9,828 -101 -600 59
2024 241,522 2,183,900 9,984 -103 -600 59
2025 245,345 2,202,400 10,142 -105 -600 60

3
 BASELINE DIFFERENCE FROM BASELINE

Year GDP Employment Tax Revenues GDP Employment Tax Revenues

2018 219,804 2,076,400 9,086 -191 -2,600 190

SCENARIO IV 2,111,600
2019 223,283 2,093,900 9,230 -306 -2,800 190
2020 226,818 9,376 -325 -2,700 191
Reduction
2021 230,408in Individual
2,129,500 Income Tax
9,524 -333 Deductions
-2,600 193
2022 234,055 2,147,500 9,675 -340 -2,600 195
Another proposal seeks to increase tax revenue by reducing the amount allowable for individual income
2023
tax deductions237,759 2,165,600
due to excess federal itemized9,828 -347
personal deductions. -2,500
We find that 197
this policy would lead to a
2024 241,522 2,183,900 9,984 -354
decrease in full-time employment by 700 jobs and lowers GDP by $56 million. -2,400 199
2025 245,345 2,202,400 10,142 -361 -2,400 201

BASELINE DIFFERENCE FROM BASELINE

Year GDP Employment Tax Revenues GDP Employment Tax Revenues

2018 219,804 2,076,400 9,086 -56 -700 56

2019 223,283 2,093,900 9,230 -89 -700 56
2020 226,818 2,111,600 9,376 -95 -700 57
2021 230,408 2,129,500 9,524 -97 -700 57
2022 234,055 2,147,500 9,675 -99 -600 58
2023 237,759 2,165,600 9,828 -101 -600 59
2024 241,522 2,183,900 9,984 -103 -600 59
2025 245,345 2,202,400 10,142 -105 -600 60

Note:
GDP and tax revenues in millions of 2009$.
Employment in units of full-time equivalent non-farm jobs, rounded to the nearest hundred.