Then There Is JBE’s Other Tax Increase Idea

We already discussed, last week, the $500-700 million gasoline tax hike idea which is supposed to fund road improvements through a replenishing of the Transportation Trust Fund, which spends a whopping 11 percent of its current funds on actual road improvement. That idea is likely going to be a difficult sell in the legislature.

But now there is our governor’s other idea – namely, to pass a “tax reform” plan consisting of replacing Louisiana’s corporate income tax with a gross receipts tax. Lest you be tempted to believe this would be an improvement, consider that this is a Democrat governor with a budget deficit – he’s not proposing this in order to collect less money in taxes.

Governor John Bel Edwards is seeking to give the Louisiana tax system a facelift during the upcoming legislative session. Port Allen Senator Rick Ward supports the effort to repeal many business tax exemptions, so that large companies are paying taxes to the state, instead of getting a big refund.

“Quite a few of your very large businesses that are not paying once they take advantage of all the different exclusions and deductions, so they would end up having to pay something.”

Ward says the plan to eliminate more corporate tax breaks is a much more fair approach.

“You have a lot less winners and losers than we currently have right now.”

But Shreveport Representative Alan Seabaugh is skeptical of Governor Edwards attempt at tax reform. He’s concerned that with the state searching for more dollars, higher taxes will be proposed when legislators meet in April.

“I think we’re going to see corporate income taxes increase, we’re going to see an attempt to increase personal income taxes, we’re going to see an attempt to pass a gas tax.”

Seabaugh also says if the state cuts exemptions and credits that businesses currently benefit from, then that will hurt economic development efforts.

“Enticing businesses into Louisiana by giving them tax credits and when those businesses come here they create jobs, which is better for everybody.”

We asked Ward about that quote, and his response indicates he isn’t backing the idea of a gross receipts tax per se the way the Louisiana Network is framing it…

“I don’t know enough about the gross receipt plan to be in favor,” Ward said. “I am in favor of removing exemptions that allow us to reduce the rate as low as possible and simply the tax code. I am interested to hear more about it but I am most interested in tax simplification and reduction in rates.”

What we’re hearing from our sources at and around the state capitol is there is no chance Edwards’ gross receipts tax idea is going anywhere. The legislature is loath to support anything that looks like higher taxes, plus a change from corporate income to essentially a tax on corporate sales could be crippling to small and startup businesses operating on a low profit margin – not to mention sole proprietorships where the owner is paying individual income taxes, and that’s a lot of people. In their cases, they’d be paying individual income taxes because that’s how they file, and therefore the corporate income tax they’d be charged isn’t currently an issue – but with the change they’d have a brand new tax to pay on the gross receipts of their business.

They’d get hammered. Particularly if the tax is calibrated to be revenue neutral.

This isn’t going anywhere, though you’ll hear a nice buildup of it in the state’s mainstream media in advance of the session. Once that session starts, though, don’t be surprised if it sputters and dies in the first few days just like Edwards’ predecessor Bobby Jindal’s idea of shifting from an income tax to some sort of consumption tax did back in 2014.

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