Economists warn tax increase to cut La. revenue

The near-inevitable federal tax increase in 2013 will mean less revenue for state services in Louisiana, two state economists said Monday.

“We are going to have another budget issue over collections,” said Jim Richardson, an LSU economics professor. “Our feds will see to that.”

Richardson and Greg Albrecht, chief economist for the Legislative Fiscal Office, spoke to the Press Club of Baton Rouge.

Their comments came on the heels of last week’s announcement that the state is facing its fifth year of midyear budget cuts amid less-than-expected state revenue collections.

On Friday, Jindal administration officials spelled out plans to trim $166 million in the state’s $25 billion operating budget.

Because of the way Louisiana’s tax system is set up, a rise in federal taxes means less revenue for the state and vice versa, Richardson said.

President Barack Obama and congressional leaders are trying to agree on a plan that combines tax increases and spending cuts.

However, many expect tax increases of some kind on single earners who make more than $200,000 per year and joint filers who make more than $250,000.

“And that will come back and affect Louisiana in some way,” Richardson said. “That is what we have to worry about.”

Richardson is a member of the Revenue Estimating Conference, which decides how much state government can spend.

The federal action could trim state revenue collections by $124 million, Albrecht said, and possibly more, and that impact could start being felt in spring 2014.

Budget forecasters have factored in some such decrease in future state revenue tallies to account for the expected increase in federal income taxes, he said.

Aside from the latest midyear reductions, state services face a shortage of about $1 billion for the financial year that begins July 1 to maintain spending at current levels.

Gov. Bobby Jindal has ruled out state tax increases to address the issue.

The 2013 regular legislative session begins April 8.

Richardson cited a chart that shows Louisiana’s state and local tax burden is about $3,000 per person, which is around the middle of the pack among states in the South.

“The tax burden is not the most-pressing issue except in the sense of how people perceive it,” he said.

Richardson said the highest marginal rate for single filers — 6 percent in Louisiana — takes effect with $50,000 of taxable income. He said the top rates kick in at $3,000 of taxable income in Alabama, $7,000 in Georgia and $10,000 in Mississippi.

Albrecht said state revenue grew by about 4.7 percent year between 1990 and 2005, then just over 4 percent until 2010.

Personal income tax collections and sales tax revenue accounts for half of Louisiana’s revenue base.

Before the recent downturn, much of the surge stemmed from a revenue windfall during recovery after Hurricane Katrina struck in 2005.

About $150 billion flowed into the state over four years from the federal government and private insurance firms, Richardson said.

Albrecht said he thinks state revenue will grow by about 3 percent a year for the next several years.