JUNEAU: One More Time

In this column on March 27, I stated that the top goal of LABI for 2013 was as follows: “Tax increases on businesses and investments in a slow economy are a recipe for disaster. In order to maximize chances for recovery, LABI will oppose any proposal that increases or has the effect of increasing the tax burdens on businesses.” That column went on to state that the organization’s top priority goal would be applied to whatever final proposal the Jindal administration developed for its “tax swap” plan. Since their plan would have resulted in a $500 million plus tax increase on the business community, and following the clear policy established by the leadership of the organization, LABI acted to defeat the proposal. The Jindal administration never attempted to move actual bills in the face of strong legislative opposition.

LABI’s position received considerable notoriety in the media as well as in governmental circles. The governor obviously was not pleased with our stance, and opponents of the governor delighted in it. LABI’s position, however, had nothing to do with the governor or his adversaries and everything to do with his proposal and the long-established policy position of the organization.

Now a month has passed, and once again there is talk of a possible large tax increase on businesses. This time the source is not the governor but the Legislature, in particular the House of Representatives. The current discussion centers around not a tax swap but a tax increase. Some members of the House are tip-toeing around that phrase, pretending that the reduction of tax exemptions, credits, or exclusions would be an “adjustment” and not a tax increase. That won’t wash. Any time an individual or a business has money taken away through any change in the tax code, that is a tax increase, not an “adjustment.” Words have meanings, particularly to those adversely affected by the language of legislative instruments.

The House will take up one or more tax increase measures next week. At the time of this writing, the proposals are conceptual only. A month has passed, but nothing has changed regarding the policy position that LABI has maintained not just for the past month but for the last several decades. LABI will apply that policy to the proposals put forth by the Legislature, just as we did with the governor’s proposal–and again, LABI will act accordingly.

One of the rumors floating about at this point is that the tax increases will focus on an across-the-board reduction in tax exemptions currently granted. The question is whether “everyone” will be subject to the across-the-board reductions of exemptions as some in the House are claiming.

Quite likely, most business will be included, but I have strong doubts that other entities will. For example, the exemption budget is rife with exemptions for farm supplies and equipment. Will those be included? Will exemptions for all non-profits be taxed? What about exemptions for local governments? LABI does not champion taxing farmers, non-profits or local governments, but we fully expect few if any changes in the tax code will be aimed at those entities, in spite of the “everyone will share the pain” rhetoric.

Additionally, there is some talk of suspending the targeted exemptions for one year, which would not be subject to a gubernatorial veto, but that would simply be replacing one source of one-time money with another source of  non-recurring revenue.

Governor Jindal discovered what a Herculean task it is to make significant changes in the tax code in a short amount of time. The House of Representatives will face the same problem. Developing accurate revenue estimates and dealing with potential unintended consequences isn’t an exercise to be undertaken in a short amount of time. Replacing $500 million in non-recurring revenue with a similar amount of tax increases will not go unnoticed politically or economically.

Businesses are already struggling to absorb recent and soon-to-be-implemented tax increases from the federal government. They will not look kindly on more coming from the state level.

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