According to this report, the State of Louisiana has experienced an unexpected increase in state and local tax revenues:
With an economy still wobbly from Katrina, which displaced several hundred thousand people and destroyed 200,000 homes, Louisiana's state government finished the fiscal year that ended last Friday with revenues expected to total about $9.2 billion.
That topped an initial revenue estimate of $9.1 billion made in May 2005 and was much stronger than the $8.2 billion estimated in October as forecasters assessed the devastation in New Orleans and elsewhere in Louisiana.
Analysts attribute the increase to sales taxes collected on spending of federal funds flowing into the state, and on higher fuel prices:
But early in 2006, trends in revenue collections picked up dramatically, most importantly in sales taxes, as federal emergency monies were spent and aid workers, journalists and others temporarily in the state went about their businesses.
"After the first of the year, it just took off. Sales taxes have run 18 percent higher each month than the same month the previous year. There were thousands and thousands of car purchases. We have been lucky in oil and gas," Albrecht said.
Casinos are also contributing to the state's economy. According to the article, casinos in Shreveport, Baton Rouge, and along the Texas Border are doing well, and have picked up some business from Mississippi where most of the casinos are still shut down after Katrina.
The article also says prospects are good for the rest of 2006 and for 2007, as more aid money is released. But economists warn that politicians shouldn't get used to it:
But much of that money will spur one-time purchases that cannot be relied upon for government revenue in later years.
"It may be OK for another year or maybe two," Richardson said. "The policy-makers understand that, but that does not mean they control it. They are trying to not put a lot of the money into permanent spending."
Louisiana's labor force, and all the taxes it generates, remains 200,000 people smaller than before Katrina, according to Richardson.
The article also says that Louisiana's economy may actually shrink because the workforce may eventually be smaller by 100,000 workers as people decided to not return or relocate elsewhere.
And while the increased revenues are good for a state struggling to recover, another report says that residents of Louisiana have the 11th highest state and local tax burden in the nation:
"Estimated today at 11 percent of income, Louisiana's state/local tax burden percentage ranks 11th highest nationally, well above the national average of 10.6 percent," the report says. "Louisiana taxpayers pay $3,463 per capita for state and local taxes."
Kennedy said implementation of the Stelly tax swap plan in 2003, which brings in more income tax revenue yearly, and increases in sales and property taxes levied by local governments resulted in higher tax collections. Also, the Legislature approved a number of fee increases on licenses, permits and education, which are considered taxes.
But the rise in tax burden began well before the Stelly Plan, the study shows.
Louisiana ranked 48th in the nation in 1993 and by 2000, the tax burden had increased to 17th highest in the nation. In 2002, the year before Stelly went into effect, the tax burden was 15th highest in the nation and rose to 12th in 2003. It's been at 11 since 2004.
Despite the heavy state and local tax burden, Louisiana ranks 49th in federal tax burden, meaning there are a disproportionate number of low-income workers paying lower or no federal income taxes.