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LABI Urges Caution, Recommends the Legislature Focus on Job Creation and Budget Reform to Address Fiscal Challenges


March 29, 2017

FOR IMMEDIATE RELEASE:

 

Baton Rouge, La. - Following the release of Governor John Bel Edwards’ tax proposals today, the Louisiana Association of Business and Industry (LABI) reminds the Legislature and the administration that the Louisiana economy is in the midst of a recession and they should proceed with caution as they approach the April session.
 
LABI 2017 Chairman of the Board Art Favre noted: “Louisiana has lost 25,000 jobs since the recent peak of the economy in 2014. Employers and families are struggling to stay afloat, but have already paid $1.3 billion more in taxes this year than last year. We urge the Legislature and the Governor to keep the people of this state at the forefront of any plan for fiscal reform and to take a comprehensive approach that includes changes to spending and the budget structure as well as more accountability across state government.”
 
LABI pointed to its recent publication that documented the tax increases of 2015 and 2016, showing a combined impact of $4 billion in new taxes on individuals and employers coming into the state over the next five years.
 
“The Governor's latest tax proposal seems tone deaf to economic reality. After substantial revenue increases last year, state government should work harder to efficiently deliver services in a way our economy can afford,” stated LABI President and CEO Stephen Waguespack. “Before asking for even more revenue under the guise of reform, taxpayers deserve an explanation for how the additional $1.3 billion in state revenue is being spent this year when priorities like TOPS remain unfunded.”
 
The new Louisiana Department of Revenue Tax Exemption Budget released just days ago shows that the often-cited corporate exemptions are not the culprit for the current deficit. The inventory tax credit is down 60% from 2015 to 2016, now totaling just $226 million from a peak of $570 million. The Net Operating Loss deduction is down 65%, and the exemption for business utilities has dropped by 59%.
 
LABI’s Tax Council Director and Vice President for Government Relations Jim Patterson reminds the Legislature and the administration that: “Business is paying more than its fair share of taxes today. To allege otherwise is absolutely false. Employers in Louisiana pay the majority of property taxes in this state. Employers pay both individual and corporate income tax. Employers pay half of all sales taxes in the state – at the highest rate in the nation. Employers pay a franchise tax and an inventory tax in Louisiana, which most states don’t have. Employers pay excise taxes like severance tax and gas tax. It’s time to put political rhetoric aside and look at the facts.”
 
With regard to the Gross Receipts Tax concept in particular, LABI is wary. National experts and economists widely pan this tax, which is generally accepted as bad tax policy by groups as varied as the Council on State Taxation (COST), the Institute on Taxation and Economic Policy (ITEP), and the Tax Foundation. These national organizations raise significant concerns with the Gross Receipts Tax because it violates a number of tax policy principles such as transparency, fairness and competitiveness. 
 
Patterson details a few concerns: “The Gross Receipts Tax leads to increased costs of production and an effective tax rate that is hidden from the consumer due to a ‘pyramiding’ effect. It taxes the first dollar of receipts or revenue without regard to profitability or ability to pay. Few or no deductions are allowed in general, and there is the potential for double taxation by those companies that pay individual income taxes as business pass-throughs. Corporations would now be required to calculate both income tax and the gross receipts tax, further complicating an inefficient system. Furthermore, the Gross Receipts Tax encourages vertical integration, which drives companies to find vendors outside the state. Is this what we want for Louisiana employers?”
 
State economists have repeatedly cited Louisiana’s poor economic performance as the driving factor behind the state’s deficit. LABI urges state leaders to look outside the Capitol to see what is really going on across this state and react accordingly.
 
“We need a plan to create jobs,” remarks Waguespack. “We need a plan to change the structure of the budget itself. We need a plan that tackles expensive state programs. What we do not need is a knee-jerk massive tax change where the primary goal is to generate revenue with little regard to the impact on the working families and employers of this state that will lead us right back to where we started: a down economy and a prolonged deficit.”
 
Waguespack concludes: “This latest tax plan seems more focused on playing politics against the Legislature than with developing sound fiscal policy for Louisiana.”
 
LABI’s in-depth analysis of the state’s budget challenges is outlined in the three-part Budget Basics research series, which includes a series of recommendations for budget reform. LABI also reminds state leaders to look to its long-standing agenda, created by our member companies, to help spur job creation. Solutions like legal reform, deregulation, workforce development and better infrastructure will help put Louisiana on the path to prosperity, helping to resolve the state deficit in the process.

 
For Press Inquiries Contact:
 
Camille Ivy-O’Donnell
(817) 944-5091
camillei@labi.org
 
 
 
About The Louisiana Association of Business and Industry

The Louisiana Association of Business and Industry was organized in 1975 to represent Louisiana businesses. LABI is proud to be Louisiana’s official state chapter for the U.S. Chamber of Commerce and the National Association of Manufacturers. LABI’s primary goal is to foster a climate for economic growth by championing the principles of the free enterprise system and representing the general interest of the business community through active involvement in political, legislative, judicial and regulatory processes. Find out more information at www.labi.org. 
 

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