Louisiana Spotlight: Governor’s business tax plan was a surprise
BATON ROUGE — Where did that come from?
That’s the question lawmakers, lobbyists and advocacy groups are asking about a centerpiece of Gov. John Bel Edwards’ tax law rewrite, a proposal to replace existing corporate income and franchise taxes with a corporate tax on sales.
The governor’s decision to pivot from the business tax recommendations of a legislatively-created study group and push a different approach has left many at the Louisiana Capitol scratching their heads — and searching for more information.
Edwards will release details Monday, when he unveils his package of proposed tax changes two weeks ahead of the legislative session. But the Democratic governor upended the debate when he started floating the idea of a corporate tax on sales, known as a “gross receipts tax,” a couple of weeks ago.
That wasn’t among the proposals — or anywhere in the 71-page report — offered by a task force assembled by lawmakers, with Edwards’ support, that did eight months of review before suggesting what it believed was the best tax revamp for Louisiana.
“I haven’t talked to anybody who had an inkling that this was coming,” said Barry Erwin, president of the nonpartisan Council for A Better Louisiana and a task force member. “This tax seemed to be more of an outlier, and it’s not one that we really had a level of comfort with.”
Edwards’ chief legislative allies have remained publicly silent about the concept, saying they don’t know enough yet. Advocacy groups that traditionally support the governor also have stayed mum. Only one lawmaker has vocally embraced the general idea of the tax.
Edwards is shifting from some task force suggestions, assuming they can’t win passage since some previously were snubbed by voters or Republican lawmakers who form the legislative majority.
Edwards spokesman Richard Carbo said floating the gross receipts tax idea “doesn’t mean that we’re abandoning everything that the task force recommended.”
He said the governor wants to find agreement on tax changes that can stabilize state finances and address the financial cliff looming in 2018 when more than $1 billion in temporary sales taxes expire.
If the governor hopes to build support, he’s got limited time.
“It is a new idea. It is something that we believe will help small business in Louisiana, and we’re going to make that case to the public starting Monday,” Carbo said.
In general, a gross receipts tax is charged on the total revenues of a company, without looking at expenses or profit margins.
A handful of states have some variation on the tax, while others adopted the tax only to later abandon it.
Republican former Gov. Mike Foster proposed something similar in 2000, but it went nowhere.
Supporters say the tax can be broad-based, applying to every business at a low rate and ending reliance on a corporate income tax structure riddled with special carve-outs.
Critics say businesses pass the taxes along to consumers, disproportionately hitting the poor.
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.
Rep. Kenny Havard, R-St. Francisville, likes the idea of a gross receipts tax as a possible way to keep large corporations from using loopholes to avoid taxes. But he’s not sure what the governor’s proposing, or if he’ll support it.
“I’m trying to make sure that everyone is paying,” Havard said. “Mom and pops, they’re paying taxes. It’s the big boys that are not.”
The Edwards administration pointed to Sen. Rick Ward, R-Port Allen, as a proponent.
But while Ward said he supports trading Louisiana’s array of business tax breaks for a lower, more evenly-applied tax rate, he’s not sure he backs a gross receipts tax.
“I’m not for or against it yet because I haven’t seen anything on it,” he said.
House Speaker Taylor Barras, R-New Iberia, said lawmakers have many unanswered questions.
“When you’re talking about this in a recession time in Louisiana and you’re still struggling with unemployment and companies still showing losses, to have the word spread that even if a company showed a loss, they would still owe a gross receipts tax has kind of sticker-shocked a few people,” he said.
EDITOR’S NOTE: Melinda Deslatte has covered Louisiana politics for The Associated Press since 2000. Follow her at http://twitter.com/melindadeslatte