Budget / Taxes

Killing the Commercial Activity Tax Right Decision for Louisiana

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Baton Rouge, LAThe Pelican Institute, Louisiana’s premier voice for free markets, today applauded the decision to withdraw the commercial activity tax (CAT) from consideration. The CAT would have been devastating to the state’s economy.logo (1)

The Pelican Institute joined with our partners at The Buckeye Institute’s Economic Research Center to provide policymakers with a timely analysis of the disastrous effects the CAT would have on Louisiana. Today, the right decision was made for the state’s future and for its citizens, and we are gratified that our warnings of the disastrous impact the CAT would have had were heeded. The proposed commercial activity tax would have led to significant job loss for Louisiana, higher prices for consumers, and would have hurt average citizens the most,” said Abhay Patel, acting Executive Director for the Pelican Institute.

The Pelican Institute will release a detailed study produced in partnership with The Buckeye Institute’s Economic Research Center later this week. The Buckeye Institute employs a more reliable, dynamic scoring model to test more than a dozen possible changes to Louisiana’s tax policy and show their effects on gross domestic product, jobs creation or loss, and revenue. The new study found that the CAT proposal would have led to the loss of more than 11,000 existing and potential Louisiana jobs in its first year alone and a decline in the state’s economy of more than $100 million.

“We in Ohio have seen the negative impact the CAT can have, and as I said when Louisiana’s proposal was unveiled, it is unclear why any state would want to import this type of plan,” said Robert Alt, President and Chief Executive Officer at The Buckeye Institute. “There is a reason why only five states continue to impose this type of tax burden and why two of those five – Texas and Virginia – are looking to eliminate it.”

Orphe Pierre Divounguy, the lead economist with Buckeye’s Economic Research Center and the lead author on the forthcoming report said, “Given the negative impact on wages, and employment prospects, the CAT would have done more harm to Louisiana’s economy and its citizens than good. The static scoring used by Louisiana’s Department of Revenue does not take into account how the real world reacts to changes in tax policy and overestimates revenues that can be raised.”

The Pelican Institute is a nonpartisan research and educational organization and the leading voice for free markets in Louisiana. The Institute’s mission is to conduct scholarly research and analysis that advances sound policies based on free enterprise, individual liberty, and constitutionally limited government.

The Buckeye Institute’s Economic Research Center is a leading research center that provides timely data-driven research to policymakers across the country to inform decisions on tax, economic, healthcare, and other major public policy issues.