DENHAM SPRINGS – A proposal by Gov. John Bel Edwards to shift more of the tax burden to businesses drew uncertainty from two Livingston Parish advocates for the commerce sector.
Livingston Parish Economic Development Council President David Bennett and Chamber of Commerce CEO April Wehrs said Thursday they have not taken a formal stand on the Commercial Activity Tax unveiled Wednesday by Gov. Edwards. Both said, however, they will not support a measure which puts further strain on the Livingston Parish economic sector.
“Any additional burden is a big hit to business, particularly when you consider what we’ve all been through in Livingston Parish the last seven months,” Wehrs said. “Anything that inhibits or stops business growth and the ability to hire is not good, and that’s something we would oppose.”
Gov. Edwards’ plan would create a fair tax system to ensure that we all pay our fair share. In addition, the CAT proposed by Gov. Edwards would exempt small businesses making less than $1.5 million per year.
Steven Waguespack, President of the Louisiana Association of Business and Industry, said Wednesday the tax proposal “seems tone deaf to economic reality," according to The Associated Press.
Gov. Edwards said it would shift more of the tax burden to businesses, lessen sales tax and raise hundreds of millions for next year’s budget.
Bennett said the additional tax burden could hamper both profitability and competitiveness.
“I understand Gov. Edwards is trying to create a fair tax system to create revenue, but the initial concern is for those types of companies with relatively low margins and very high volumes, such as supermarkets and restaurants,” Bennett said. “Supermarkets do a high amount of revenue, so those types of businesses would be impacted very significantly.
“Those with very high margins under the threshold with very high profit may pay very little, but smaller grocery stores doing a few million dollars a year would be hit harder,” he said.
Businesses in Louisiana and across the state would prefer a simpler tax code that allows them to retain a competitive edge, while allowing them to grow and add jobs, Bennett said.
It could put Louisiana at a disadvantage against neighboring states, he said.
“We need to maintain the competitive edge, especially with those businesses that have a far-reaching distribution area,” Bennett said. “For example, Martin Brower reaches a broad area, so they could have moved 100 miles down the road to Mississippi or to Texas … they have a lot of flexibility.
“What we have here is a valid concern for any company in the area,” he said. “It’s eighty-five miles to Mississippi on Interstate 12 and not very far on Interstate 55, either – and we’re in competition with Mississippi on those types of industries.”
The proposed tax package would replace $1.3 million in temporary taxes set to expire in mid-2018 and generate another $400 million for next year’s budget, according to estimates provided by the Governor’s Office.
It would also generate the $800 million needed to cover the loss of revenue from the expiration of a temporary sales tax set to expire June 30, 2018, also known as a “fiscal cliff.”
According to the Louisiana Department of Revenue, in 2015, there were 149,000 corporate tax filers in the state. Data shows that more than 129,000 of those filers paid no taxes to the state of Louisiana.
Of the 414,000 businesses in the state, 389,000 make less than $1.5 million annually. These businesses would be assessed a flat $250 tax, rather than the calculation for gross receipts.
Gov. Edwards said the tax package would stabilize state revenue, bring an end to the long string of annual deficits and generate new funding for the state. It would also stop additional cuts to higher education, which has lost $683 million since 2009.
The tax package comes at the same time the state Department of Transportation wants a 17-cent hike on the gasoline tax, which would help cut down on the backlog of road improvement projects.
The fuel tax, along with the taxes on businesses, come down to a matter of accountability, Bennett said.
“The business climate, taxes, tax structure and transportation all tie together because of the process of getting products to and from facilities,” he said. “If businesses feel taxes are acceptable to them, then they’ll need to make sure they remain accountable.
“Accountability and trust are the big factor no matter how much or how little, from an overall business environment,” Bennett said. “Our opinion is that our business environment is such that it should allow our companies to operate efficiently, profitable and continue to grow in our area.”