The word “tempestuous” probably best describes what many believe will characterize the 2017 session of the Louisiana Legislature, which begins on Monday at the State Capitol.
It’s rarely been a pretty process in recent years, much of it because of the ongoing battle between lawmakers who want to raise taxes and those who want to cut services.
Gov. John Bel Edwards drew the lines in the sand March 29 when he released a tax plan geared toward the elimination of annual budget cuts.
It’s hard to fault any plan to curtail cuts in programs such as education and healthcare, both of which have undergone major trips to the cutting board – or perhaps the slaughterhouse - depending on how you wish to look at it.
The battle to cut services or raise taxes has been an all-too-common saga going back to the Jindal Administration, when the elimination of the Stelly Tax Plan did not result in the post-repeal reinstatement of the personal income tax rates the legislation reduced. The budget suffered a double whammy by the end of 2013 when oil prices plummeted to figures not seen in more than 10 years.
The plan Edwards proposed would shift tax burden to the business sector, a reversal from the previous administration.
The Commercial Activity Tax would create what Edwards touted as a fair tax system to ensure all businesses “pay their fair share.” The plan would largely target the corporate industrial sector, some of which has thrived off lofty incentive packages which became the norm during the Jindal years.
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.
The plan would exempt small businesses which make under $1.5 million a year. It looks good on paper, but bear in mind the sum of $1 million doesn’t pack the same punch it once did.
It creates concern for local business advocates such as Livingston Economic Development Council President Larry O’Neil and Livingston Chamber of Commerce Executive Director/CEO April Wehrs. Both worry about the potential impact on “mom and pop” businesses, as well as supermarkets and restaurants – both of which stock a robust supply of inventory, but survive amid razor-thin profit margins.
O’Neil and former LSU economist Dr. Loren Scott also expressed concern over its impact on Louisiana in the competition for more industry and subsequent job creation.
Louisiana in the last 10 years has become an attractive region for the industrial sector, but so have Mississippi and particularly Texas.
Scott and O’Neil both fear a shift in tax to the business sector could backfire miserably. Scott said Monday it would not take much effort for industry to turn away from Louisiana and look elsewhere for greener pastures.
State Rep. Clay Schexnayder, meanwhile, believes such a move could hamper the job picture and perhaps trigger a spike in unemployment. He represents not only the southern part of Livingston Parish, but also much of Ascension, St. James and St. John the Baptist parishes – all of which benefit greatly from jobs in the petrochemical industry.
Scott also put into play what he considered “simple mathematics.”“You raise taxes on business and consumers will inevitably pay,” he said.
It’s obvious the state’s tax structure needs an overhaul. The incentive program has allowed a wet kiss of a deal for big industry – big enough, in fact, to put the state in the red on tax collection for new industry the last several years. It’s also a slap in the face to the small-business sector, which struggles to pay taxes the same time it fights to maintain a profit.
Tax battles have traditionally spurred some of the stormiest battles in the Legislature. The proposal by Edwards puts the state on the tightrope between fair taxation and the ability to retain a strong job market for the state.
It will take compromise, even though it’s much easier said than done on this issue. Expect an ugly battle over this issue, one in which one side will likely take a huge fall off the proverbial tight rope.