Louisiana’s Manufacturers Are Now Fighting Against The Loss Of The Utilities Sales Tax Exemption

Here’s a press release which just came out this morning…

A political action committee has begun a statewide media campaign aimed at getting the Louisiana Senate to kill a new $100 million sales tax that has passed the House of Representatives.

HCR 8 by Rep Jack Montoucet, D-Crowley, imposes a nearly 1 percent sales tax on electricity, natural gas and other utilities used by businesses in the state.

The Louisiana Manufacturers Political Action Committee has purchased more than 1,600 radio spots over the next two weeks to attack the new tax. “This is a new sales tax, a $100 million tax that falls 100 percent on business,” said Greg Bowser, LAMP’s administrator and Executive Vice President of the Louisiana Chemical Association and the Louisiana Chemical Industry Alliance. Bowser also directs governmental affairs activities for both LCA and LCIA.

The LCA and LCIA consist of more than 100 chemical manufacturing sites and nearly 800 affiliated companies that supply the plants with contracting and maintenance, machinery and equipment, electrical power and other vital products and services. Many of these companies and their employees are also counted among the 250 members of LAMP.

The radio spot says, “If you’re in business, work for a business or buy from a business, you should be against this new sales tax. That should be all of us. This tax ups the cost of doing business, could kill jobs and raise prices. Tell your senator you don’t want a new sales tax on business. Ask your senator to kill HCR 8 so HCR 8 doesn’t kill jobs, maybe your job.”

“The reason HCR 8 should be killed,” Bowser said, “is not only because it penalizes all Louisiana businesses. It does particular harm to the one area of the economy that’s growing, the chemical industry. The plants use huge amounts of natural gas to generate power and steam. They also purchase large amounts of electricity from their utility providers. A big tax like this can literally make the difference when companies decide where and when to invest big money.”

A one percent sales tax on business utilities and natural gas was enacted in 1986 and swelled to 4 percent by 2001. Business whittled away at the tax over the next several years and it settled at 3.3 percent in 2007. LAMP made the repeal of the tax a major campaign issue in 2007, and the Legislature unanimously repealed the tax with Gov. Bobby Jindal’s enthusiastic backing in the second special session of 2008.

“If it was a good idea to unanimously repeal the tax in 2008, it’s a bad idea to re-impose it now at whatever rate, especially considering all the billions in investments that have been announced thinking the tax would not be revived,” Bowser said. “It grew over the years previously, and no one can say it won’t grow again. If it starts at $100 million, there’s no telling where it will end,” he added.

The chemical industry, which in Louisiana is the core of the state’s manufacturing sector, is an 800-pound gorilla when it comes to political campaigns in Louisiana, though it tends to play both sides of the fence in terms of ideology – it tended to support Mary Landrieu fairly heavily in the Senate race last year, at least until it began to look like she was dead in the water in the runoff.

So if LAMP were to take the position that anybody who voted in favor of eliminating the exemption for business utilities from the state sales tax needs to be run out of the legislature, they have the resources to make that stick.

And they’re not without reason to do so. After all, there are not many states where businesses have to pay sales tax on their light and phone bills. In most states, costs like that are recognized as “overhead,” and it’s considered good policy to help minimize overhead for the people who create and provide jobs as much as possible.

So stupid tax policy like this wouldn’t fly in many places around the country. It does, however, fly in the Republican-controlled Louisiana House of Representatives – just like it flew when Edwin Edwards got it enacted in 1986 on his way to being blown out of office the next year.

If it flies in the Senate, which is eminently possible, it shouldn’t be too much of a surprise if the industry starts to become a lot more active in political campaigns this fall – with a decidedly more ideological focus.



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