Dan Juneau – The LABI Report

One of the areas in which Louisiana is very much out of step with the rest of the country is in how property taxes are handled. The current system is a hodge podge of inefficiency and inequity.

Unfortunately, little is being done to make the system work better and convince the taxpayers that everyone who pays property taxes will be treated fairly.

Unlike some states, there is no statewide property tax in Louisiana. The Constitution authorizes the Legislature to levy up to 5 mills of a statewide tax, but that has never been done. Property taxes in Louisiana are strictly taxes at the local level.

The presence of the highest homestead exemption in the nation ($75,000) makes the local property taxes a tremendous burden on businesses, since a huge amount of residential property is not on the tax rolls.

Business and commercial interests pay over 85 percent of the property taxes in Louisiana – a fact that does not enhance our economic development agenda.

Recently, homeowners in certain areas of the state have complained loudly about the inequities in our property tax system. Some property owners who have recently purchased a home found that their tax assessments are much higher than homeowners who have lived in similarly valued homes for decades.

These and other complaints led the Legislative Auditor to study assessment practices throughout Louisiana. The Auditor’s report was extremely critical of some aspects of assessment practices and pointed out where the law is not being followed by assessors.

Numerous bills have been filed in the current legislative session that address property taxes in general, and the homestead exemption in particular.

Some of the bills make reasonable exceptions to the “violations” found by the Legislative Auditor.

For example, in some cases if the existing letter of the law were followed, the spouse of a deceased marriage partner would not be allowed to continue to receive a homestead exemption. Certainly, no reasonable person would argue that a homestead exemption should not be continued in such a case.

Another “illegal” arrangement exists when a husband and wife place their home in a trust for estate planning purposes. No new homestead exemption is being created in such an arrangement, and the legislation moving through the process would allow such exceptions to continue.

Unfortunately, not all of the bills filed regarding the homestead exemption are reasonable and harmless.

Several bills have been filed that would substantially increase Louisiana’s “highest in the nation” homestead exemption.

If approved, these bills would simply pile more of the property tax burden on the business community – in particular small businesses – that are already pulling most of the load.

Another bill would create a potentially unlimited five-year homestead exemption for residents over the age of 65 who purchase a newly constructed home.

While the author of the bill has good intentions (to stimulate homebuilding), the legislation would create an inequity between those age 65 and older who live in an existing home of similar value to the newly constructed homes.

Certainly, those over the age of 65 are not being treated unfairly under the current laws governing property taxes.

Several years ago, legislation was passed that froze the assessments of those 65 and older, thereby protecting them from property tax increases derived from higher property values.

Louisiana’s property tax system continues to be in much need of reform.

Some of the legislation pending in the Legislature makes sense and does not make a bad situation worse.

Other bills would only increase the inequities that already exist in the law.

DAN JUNEAU is president of the Louisiana Association of Business and Industry.