Click to copy
Click to copy

Edwards unveils long-awaited tax plan for upcoming session

March 29, 2017

BATON ROUGE, La. (AP) — Gov. John Bel Edwards released his proposal Wednesday to rewrite Louisiana’s tax laws, pushing significant changes that would shift more of the state tax burden to businesses, lessen sales taxes and raise hundreds of millions for next year’s budget.

The tax package — released fewer than two weeks before the legislative session opens April 10 — would replace $1.3 million in temporary taxes set to expire in mid-2018, while also raising another $400 million for next year’s budget, according to the Democratic governor.

Edwards said the effort is aimed at stabilizing state finances and ending continued cycles of budget deficits that have kept lawmakers and governors scrambling for nearly a decade to patch together money to pay for government programs and services.

The tax changes also would drum up new money that Edwards wants to spend on the TOPS college tuition program, K-12 education and other items.

“We’re operating under a broken, outdated structure that simply doesn’t work for Louisiana any longer,” he said. “This is a fiscally responsible approach to bring our system into the 21st Century.”

Many parts of the package would require hefty, two-thirds votes from lawmakers, including the centerpiece proposal, a new tax on gross receipts called a Commercial Activity Tax, estimated to raise up to $900 million a year from businesses.

Businesses making more than $1.5 million annually would pay the tax, which is a tax on sales without looking at expenses or profit margins. Those companies making less than $1.5 million annually — about 94 percent of those in Louisiana, according to the revenue department — would be assessed a flat tax ranging from $250 to $750.

Stephen Waguespack, president of the powerful Louisiana Association of Business and Industry said the idea of a tax rewrite aimed at raising more money for state coffers was “tone deaf to economic reality” amid a state recession.

The proposal attempts to get at businesses that use existing tax laws to avoid paying state taxes. Edwards says of 149,000 corporate tax filers in the state, revenue department data shows that more than 129,000 didn’t pay taxes in 2015.

Edwards said he’s trying to make sure businesses pay “their fair share,” so that the funding of government services doesn’t rest disproportionately on individual taxpayers, like middle-class households.

“It simply asks our businesses to do their part,” he said.

In a slight trade-off, the governor is proposing to phase out the corporate franchise tax over 10 years.

On sales taxes, he wants to let a temporary, 1-cent sales tax increase expire as planned in mid-2018. But he wants to extend the state sales tax to the purchase of some services, like telephone services, cable and satellite television, home repairs and landscaping.

For personal income tax, Edwards proposes to do away with a tax break that allows people to deduct the federal income taxes they pay from their state tax liability, swapped out for lower overall tax rates. The governor said that would lower taxes paid by 90 percent of taxpayers.

The governor also wants to rework the myriad of state tax breaks.

Most of the attention has centered on the gross receipts tax, because it’s unfamiliar in Louisiana. A handful of states have some variation on the tax.

Critics say businesses pass the taxes along to consumers, disproportionately hitting the poor, just like a sales tax, but with less transparency. They say the tax harms companies struggling to stay afloat or startup businesses by not accounting for profit margin and can have a pyramiding effect by applying to every transaction in a production chain.

“This is the wrong approach for states,” the right-leaning, Washington-based Tax Foundation wrote in an analysis this week that said gross receipts taxes “have a negative impact on the economy.”


Follow Melinda Deslatte on Twitter at http://twitter.com/melindadeslatte

All contents © copyright 2019 The Associated Press. All rights reserved.