Louisiana voters on Saturday approved a constitutional amendment to change personal and corporate income taxes while giving a thumbs down to three other ballot measures including one that would have streamlined tax collections. Voter turnout totaled less than 14% on Nov. 13.
Amendment 2 passed by a 58% to 42% margin, according to unofficial results. It consists of a complicated swap plan, which has been touted as revenue neutral.
Under the amendment, the federal income tax deduction would be swapped for cuts in personal and corporate income tax rates and in the corporate franchise tax. The top personal income tax rate would fall to 4.25% from 6%. Under the plan, if the state collects more tax revenue than expected additional income tax cuts would be triggered.
This could have a positive impact for businesses and promote economic development in the state over time, some said.
“Passing constitutional Amendment 2 would be one small step for changing our tax rates, as it would take our personal income tax rate from 6% down to 4.25%, but one giant leap for tax reform,” Michael Hecht, president and CEO of Greater New Orleans Inc., said ahead of the vote.
He cited Legislative Fiscal Office data showing 93% of state residents would pay less in overall taxes.
However, some critics have claimed across-the-board income tax cuts could cut the amount of money available for the state to pay for roads, schools, hospitals and infrastructure.
And others said it could cost the state more than it expects, depending upon economic conditions.
“[Amendment 2] is being framed as revenue neutral,” Eric Kim, a senior director and head of the U.S. States Group at Fitch Ratings, told The Bond Buyer last month. “But the risk there is that what’s envisioned as revenue neutral now doesn’t necessarily mean that it will always play out that way. It’s sometimes difficult to project exactly what revenue will look like over the long term.”
Voters rejected the three other ballots measures.
The first amendment, which would have set up a streamlined framework for the collection and distribution of state and local sales taxes, lost by a 52% to 48% margin.
Amendment 3, which would have let a few local levee districts create a five-mill property tax without voter approval, was defeated 58% to 42%.
Amendment 4, which would have allowed an increase in the amount the governor and Legislature could cut protected funds, was rejected by a 72% to 28% margin.
Louisiana’s general obligations are rated Aa3 by Moody’s Investors Service and AA-minus by both S&P Global Ratings and Fitch Ratings. Since 2011, Louisiana has sold about $9.5 billion of bonds.