Patrick Gleason Clobbers JBE On His Gross Receipts Tax Plan

Not that it will sway the governor, or do much to alter the local media’s coverage of the coming legislative session, because Gleason’s employer is the “evil” Americans For Tax Reform and according to Louisiana Democrat lore ATR and its president Grover Norquist were somehow responsible for running Louisiana’s public fisc into the ground when Bobby Jindal was the governor. This was true because Jindal pledged not to raise taxes, and for the most part he was serious about keeping that commitment.

Well, John Bel Edwards said he wouldn’t raise taxes, either, and we found out even before he was inaugurated that he’d lied. Hardly a day has gone by since Edwards was elected that he hasn’t advocated for some form of a tax increase.

We’ll take Grover Norquist over John Bel Edwards, based on the evidence.

In the meantime, in a column at Forbes Magazine Thursday, Gleason takes us through the gross receipts tax idea and finds it wanting – not just because it’s a lousy idea for Louisiana but because Texas is getting rid of its own gross receipts tax while Edwards wants to impose one. Uncompetitive much?

Yesterday, Louisiana Gov. John Bel Edwards (D) unveiled his proposal to create a new 0.35% tax on businesses’ gross receipts above $1.5 million. Businesses would either pay the new gross receipts tax or the state corporate income tax, with Gov. Edwards’ plan dictating firms pay whichever liability is higher. After the enactment of perennial tax increases since Gov. Edwards took office, this gross receipts tax is his most harmful proposal thus far.

Economists and tax policy experts across the political spectrum agree that gross receipts taxes are among the most misguided and harmful forms of taxation imposed by a government at any level. They depress economic growth and reduce businesses’ capacity to expand and create new jobs. Worse, even businesses that fail to turn a profit and suffer great losses still have a gross receipts tax liability. It is for these reasons that only five state impose a statewide gross receipts tax.

Yet while Louisiana considers Gov. Edwards’ proposed gross receipts tax, the neighbor on its western border, Texas, is advancing legislation to phase out its gross receipts tax. In fact, gross receipts taxes may soon be repealed in two economically and politically important states – Texas and Virginia – depending on the choices made by lawmakers in the Lone Star State and voters in the Old Dominion this year.

The prospect of Louisiana imposing a gross receipts tax is even more foolish considering that not only is Texas looking to repeal its margins tax, it already has the advantage over Louisiana of having no personal or corporate income tax. There is a real possibility that Louisiana could have a gross receipts tax next year in addition to an income tax, while neighboring Texas will have no personal and corporate tax, and its margins tax will be on the path to repeal. Such a development would make it even easier for site selectors trying to choose between the two states.

One thing which is striking about Edwards and the Democrat Party he leads in this state is the runaway myopia, as though the only consideration to be had in making policy is the good of the state’s public sector. It’s either good for the teachers’ unions or state bureaucrats or public hospitals, or it’s unthinkable. Except the public sector in Louisiana, though it’s far too pervasive a piece of the state’s economy, is only a tiny slice of our economy, and it’s not critical to it. Until the price of oil hit the skids in his last year in office, Jindal’s efforts to trim Louisiana’s public sector didn’t affect our economy much at all; Louisiana fared pretty well compared to our neighbors for most of his term. Then the bottom dropped out of the oil and gas industry and unemployment skyrocketed in places like Lafayette and Houma-Thibodaux. That gave us a pretty good indication of what really drives the economy here – and it isn’t state government.

Edwards didn’t create Louisiana’s recession, but his policies will do a significant amount in keeping it going. When our neighbors begin to take advantage of an improving national economy, they’ll largely do it at our expense because our tax policy is a disaster.

The good news is Edwards’ gross receipts tax isn’t going anywhere. The House will almost assuredly kill it before it even gets to the floor. That Edwards couldn’t get a Republican to at least co-author the bill – he had to get his old legislative seatmate Sam Jones, a Democrat gadfly, to bring it – is a dead giveaway for how much of a long-shot the bill is.

But killing the gross receipts tax only mitigates damage rather than repairing it. When Texas eliminates its own gross receipts tax, it will still have no income taxes, and therefore they’ll have an even larger economic advantage next door. And it’ll be Texas, not Louisiana, celebrating economic wins and job creation while Edwards continues dreaming up new taxes to feed a bloated public sector which can’t seem to lift Louisiana out of last place in any of the categories we fund a public sector to improve.

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