Add your voice to the conversation.
LABI will actively work for the enactment of fiscal policies that promote a stronger state economy, with a focus on private sector job creation. Businesses in Louisiana pay a disproportionate share of the tax burden as compared with other states. Added to this are the administrative headaches and their costs that confront and frustrate Louisiana employers attempting to comply with state and local tax laws and their requirements. This places our state at a significant disadvantage when competing for business investment and the jobs it creates. This year’s legislative session will be non-fiscal, which limits the kind of tax legislation that may be introduced. Nevertheless, LABI will, to the extent possible, promote constructive reforms that ensure our state’s economic development while securing sufficient revenues for appropriate government services at both the state and local levels.
LABI Position: Restore advances in economic development by supporting measures that encourage industrial and business investment, and that create and retain jobs in our state, including those that limit or reverse expansion of the business tax burden. Support the availability of fair and equitable tax incentives for economic development, including those for job retention, job creation, and facility modernization. Support business tax measures that encourage the retention or relocation of jobs and businesses to this state. Oppose efforts to weaken Louisiana’s existing economic development incentives. Support elimination of the tax penalties resulting from having a commercial domicile in the state of Louisiana. Continue to educate the public, the media and public officials regarding: (a) Louisiana’s tax structure, (b) the imbalance in the tax burden borne by business, (c) the benefits of a competitive, properly balanced and predictable tax system, and (d) needed fiscal and spending reform.
LABI Position: Support long-term reforms to the structure of the state budget that require government to annually review all spending, prioritize services and rein in budget growth. Support changes to restore voter confidence in state government, including:
• Managing budget deficits without new or increased taxes or fees, including long-term reform of costly government programs;
• Gradually shifting the primary responsibility of funding local services to local governments;
• Operating state government in a more efficient, cost-effective and fiscally responsible manner, including privatizing state government services where feasible; and
• Achieving cost savings through the elimination or consolidation of programs and/or agencies that would not have a detrimental impact on the delivery of needed services.
LABI Position: Pursue efforts to ensure a competitive and viable industrial property tax exemption program, including opposing efforts to tie the exemption to considerations not directly related to industrial development. Support establishment of a “one-stop shop,” either at the state or local level, for handling applications for the industrial property tax exemption.
Business Tax Burden: Support a competitive business tax environment for Louisiana’s industries that are subject to substantial interstate competition. Oppose the imposition or increase of any taxes or fees that would expand the imbalance in the tax/economic burden borne by business in Louisiana. Oppose legislation and tax policies that would increase the tax compliance burden on business, including expanding requirements for withholding at the source.
Constitutional Convention: If a convention is called, delegates should be independently elected. If some delegates are appointed, the business community should be well represented, given the thousands of workers they employ and their significance to the state’s economy and prosperity. The public should have significant time and opportunity to engage in the Convention – both the process and deliberations.
Sunsetting Exemptions: Support the continuation of the statutory business tax incentives, exemptions and exclusions as they are scheduled to expire.
Tax Administration: Support measures to eliminate abuse of authority by state and local tax collectors. Support measures restricting the imposition on taxpayers of attorney fees and audit costs of state and local governments in tax cases. Support measures that would prohibit state and local governmental agencies and taxing authorities from entering into contingency fee or other contracts with, or from employing outside counsel, auditors, or consultants to be paid by the taxpayer or whose compensation is dependent on the outcome of the audit, award, or settlement in tax cases. Support legislation to limit the use of summary procedure, and to provide standards to correct assessments that are based on error of fact or law. Oppose state tax administration that employs audit methodologies relying upon faulty assumptions and premises that tend to result in unrealistic, over-reaching, and substantial additional tax assessments.
Tax Elections: Support a reduction in the excessive number of local tax election dates to afford taxpayers a reasonable opportunity to evaluate the merits of tax proposals.
Vote Requirement for Tax Relief: Oppose restrictions on the ability of the Legislature to lower taxes or grant tax relief.
Business Activity Tax: Oppose legislation that would impose additional or new taxes on business through a business activity, gross receipts, value-added, or any other similar taxing scheme, thus decreasing Louisiana’s ability to attract and retain jobs and investment.
Combined Reporting (Unitary Tax): Oppose efforts to impose mandatory combined reporting for corporate income tax purposes, as the imposition of this reporting method would have a detrimental impact on economic development in the state.
Franchise Tax: Support the elimination of the corporate franchise tax. Protect the exclusion of long-term debt from the corporate franchise tax base. Promote the sourcing of sales for corporate income and franchise tax purposes to be based on the ultimate physical delivery of the product to the purchaser in the state of Louisiana.
Net Operating Losses: Support full restoration and utilization of the net operating loss deduction. Oppose any further weakening of this deduction.
Inventory Tax Credit: Support repeal of the local inventory tax with a gradual transition to offset the loss of this revenue stream until a local mechanism is established for the replacement of such state funding. Oppose efforts to repeal or restrict the inventory tax credit program so long as the local inventory tax exists.
Property Tax Assessments: Support legislation to promote uniformity and to simplify the procedures for property owners contesting their property tax assessments. Oppose efforts to undermine the Louisiana Tax Commission’s constitutional authority to oversee assessments, including change orders, omitted property assessments and supplemental assessments. Support legislation to clarify existing law concerning assessment procedures, including change orders, omitted property assessments and supplemental assessments. Support appropriate and necessary reforms to the property tax system. Support legislation and changes in the Louisiana Tax Commission rules and regulations to improve the accuracy and fairness of the methods and procedures used in the assessment and valuation process. Oppose efforts by assessors to tax component parts of motor vehicles. Support the current use value system for determining the assessed value of property that is classified as agriculture, timberlands, horticulture and marshlands.
Property Tax Millages: Support legislation to limit or restrict the rolling forward of property tax millages following a mandatory millage roll-back.
Property Tax/Homestead Exemption: Oppose measures to increase the homestead exemption, which would further shift the property tax burden to business. Louisiana businesses continue to pay a disproportionate share of the tax burden as compared with other states.
Exclusions: Protect the distinction between sales and use tax exemptions and exclusions.
Manufacturing Taxation: Protect the historic interpretation of the sales and use tax exclusion for raw materials purchased for further processing. Support the exclusion from sales and use tax of all property associated with the manufacturing of property for sale, including all utilities, raw materials, catalysts, process chemicals, and other consumable items. Oppose legislation and tax policies that would result in the taxation of by-products and/or intermediate materials for sales and use tax purposes.
Manufacturing Machinery and Equipment: Oppose any elimination or reduction of the state sales, use, and rental tax exclusion for manufacturing machinery and equipment, and encourage the exclusion at the local level. Oppose efforts to restrict the application of the manufacturing machinery and equipment sales tax exclusion for repairs, maintenance and refurbishment of machinery and equipment, including tangible personal property used in the repair, maintenance and refurbishment of machinery and equipment.
Statewide Centralized Collection: Support measures to promote consistency in the administration of the state and local sales tax systems, including measures to promote statewide centralized collection and administration of local sales taxes.
Sales Taxes: Oppose measures to levy or authorize additional statewide sales taxes, or to levy or authorize local sales taxes without voter approval. Support legislation that affirms the longstanding practice that certain articles of tangible personal property, which are delivered into a local taxing jurisdiction but earmarked for ultimate use in another jurisdiction, be subject to local sales and/or use tax only in the jurisdiction where the goods are ultimately used.
Sales Tax on Repairs: Support the elimination of local sales and use tax on repairs to property that will be shipped out of state. Oppose efforts to expand local sales and use tax to labor used in repairs. Support elimination of state and local sales and use tax for repairs and services performed out of state.
Direct Pay Permits: Support measures to expand the availability of sales and use tax direct pay permits at state and local levels to all businesses.
Recodification of Provisions: Support legislation to reorganize and recodify the state and local sales and use tax statutes to make them more understandable to taxpayers, while ensuring that no changes are made that would worsen Louisiana’s already challenging business tax climate.
Energy Taxation: Protect and maintain the state sales tax exemptions for natural gas, electricity, water, steam, and other energy sources, and oppose any attempts to impose the sales tax on these or any other energy sources. Support legislation which will clarify the definition of “energy sources” to assure that all are excluded from state sales and use tax.
Oil and Gas Taxation: Oil and gas production and processing are critical to Louisiana’s economy, and LABI will:
• Oppose the imposition of any oil and gas taxes and fees, including but not limited to an oil and gas processing tax, a hydrocarbon transportation or refinery tax or fee on minerals, a first-use tax, or a coastal wetlands environmental levy;
• Oppose legislation and tax policies that would undermine the current protection of oil, gas and associated mineral rights from the imposition of property and other taxes;
• Support legislation and tax policies that affirm the historic treatment of natural gas used at the lease and at gas processing plants as not subject to sales and use tax; and• Support legislation and tax policies that establish appropriate appraisal methodologies for determining the fair market value of all property subject to property tax, including taxable subsurface oil and gas equipment.
Salt Cavern Assessments: Oppose efforts by assessors to assess salt caverns until uniform valid valuation methodologies are adopted by the Louisiana Tax Commission. Oppose efforts by assessors to assess salt caverns as other than land.
Special Funds: Oppose raiding of legislatively dedicated funds that were created and are funded by industry fees paid to accomplish specific regulatory and other purposes. Industry fees for regulatory services or other purposes should not be diverted to support the general operations of state government. If self-generated revenues exceed the cost of a regulatory or other program, the Legislature should reduce the fees accordingly and/or reduce the scale of such regulatory or other program.
Constitutionally Dedicated Expenditures: Oppose efforts to redirect trust fund dollars generated by fees from industry to expenses other than those to which they are constitutionally dedicated.
Expenditure Limit: Lower the limit on state government spending to relate to the current budget. Continue to support a reasonable formula for the determination of the expenditure limit. Once an expenditure limit has been established for any fiscal year, oppose efforts by the Legislature to increase that limit, unless such increase is appropriating monies from the constitutionally restricted surplus, and the instrument for appropriating such surplus clearly states that the temporary increase in the spending cap will not affect the computation of the expenditure limit for the following fiscal year.
Fiscal Transparency: Support efforts to increase the transparency of state and local government operations and enhance public online access to information.
Budget Stabilization Fund: Maintain and protect the concept and integrity of the fund, and the current constitutional restrictions on distributions from the fund. Oppose efforts to use the fund as security or collateral for increasing state debt.
Taxpayer Protection and Fairness: Protect and maintain enactments addressing taxpayer protection and fairness issues relative to local sales tax contract auditors, attorney’s fees charged by tax collectors, and arbitrary local sales tax assessments. Oppose any retroactive state and local legislation.
Inheritance Tax and Gift Taxes: Protect and maintain the repeal of the inheritance tax and gift tax.
Refund Procedures: Support taxpayers’ fundamental right to a prompt refund of taxes not due to a taxing authority.
“Fiscal Only” Legislative Sessions: Support the continuation of a system of alternating fiscal/non-fiscal legislative sessions.
Statewide Taxing Districts: Oppose measures to create a statewide taxing district, whose boundaries are coterminous with the state, which has the authority to levy sales, use, or any similar tax for any purpose.
Fees for Services: Support legislation codifying present jurisprudence, which provides that the imposition or assessment of charges or fees, by or for the benefit of the state or any board, department, or agency of the state, should not either: (1) have raising revenue as its primary purpose, or (2) clearly and materially exceed the cost of regulation or conferring special benefits upon those assessed (Audubon Insurance, et al v. Bernard, et al) (La. 1983).
Advance Collection of Sales Tax: Support the elimination of the advance sales tax collection program.
Mineral Property Taxes: Support legislation and/or regulations that will establish the fair market value for oil, natural gas, and oil and natural gas equipment for taxation purposes.
Property Tax – Public Service Property: Support a reduction in the ad valorem tax on property acquired by public service entities after deregulation of those companies has been implemented. Any revised system of public service property taxation should not result in a shifting of the property tax burden from regulated to non-regulated businesses.
Retirement Systems: Support consolidation and reform of state retirement systems, including elimination of early retirement after 20 years of service regardless of age for future state employees. Oppose any expansion of benefits or coverage to help ensure fiscally responsible funding and actuarial soundness of Louisiana’s public retirement systems. Support legislation that would raise the retirement age and/or increase the years of service needed for new state employees to retire. Support the use of surplus funds to pay down the unfunded accrued liability of the state retirement systems.
Hazardous Waste Tax: Oppose new or increased taxes on the generation, transportation, storage, disposal, incineration, recycling, injection or treatment of hazardous waste or any permitted emission.
Annexation: Support legislation to require municipalities to notify affected property owners before annexing any property.
Highway Priority Program: Support the use of objective criteria, including fostering economic development, to prioritize funding for state highway construction projects. Oppose allowing the Legislature to add or substitute projects in the final construction program.
Prevailing Wage: Oppose any attempts by the Legislature to re-enact a prevailing wage law, which would result in the state or local governments – and by extension, taxpayers – paying more for goods and services than is paid by businesses in the private sector.
Director, Taxation and Finance Council, LABI
Chair, Taxation and Finance Council
Advantous Consulting, LLC
Auto insurance companies in Louisiana ought to follow the lead of Allstate and Geico in reducing rates, state Insurance Commissioner Jim Donelon said Tuesday.
“The landscape has changed dramatically. The risk has been reduced significantly,” Donelon said, referring to the sharp reduction in driving following the stay-at-home orders issued by Gov. John Bel Edwards that have shuttered commercial activity throughout the state to limit the spread of the coronavirus.
Donelon made his comments shortly before Geico announced that it is “providing a 15% credit to its auto and motorcycle customers as their policy comes up for renewal between April 8 and Oct 7.” The average savings will be $150 per auto policy and $30 per motorcycle policy.
Geico acted a day after Allstate announced it would reduce rates by 15% for premiums due in April and May.
The move will save Allstate policyholders in Louisiana a total of $13 million, Donelon said, noting that he cannot legally force the insurance companies to cut rates.
In all, Allstate's reductions will save drivers nationally $600 million, the company said, while Geico estimated the savings for its drivers nationally at $2.5 billion.
State Farm and Progressive both said in emails Tuesday that they are considering rate cuts.
Louisiana has the second-highest car insurance rates in the country on average, and that has been a hot political topic over the past year.
Real Reform Louisiana, a Baton Rouge-based group, has followed the lead of national consumer groups in calling for insurance companies to pass their savings along to drivers.
“Fewer drivers means fewer accidents, and surging profit margins for insurance companies,” said Eric Holl, executive director of Real Reform, which was created several months ago to oppose efforts by the Louisiana Association of Business and Industry that blame trial attorneys for the high rates.
LABI tried to push a package of measures through the Legislature last year that would have made it harder for injured people to win awards against their insurers. Known as tort reform, the measure by then-state Rep. Kirk Talbot, R-River Ridge, would reduce car insurance rates, LABI claimed, by tilting the scales away from a lawsuit-happy system.
A state Senate committee defeated the move, and two state senators who voted against the LABI-backed bill were defeated for re-election after a vicious business-funded campaign.
Eddie Rispone, the Republican candidate for governor, promised to push tort reform, but Edwards narrowly defeated him.
Edwards has sided with the trial attorneys who oppose tort reform and question the lack of direct evidence that the changes sought by LABI will actually reduce car insurance rates. The attorneys say LABI’s effort is a smokescreen meant to take away the rights of individuals to hold companies to account for their mistakes.
State Sen. Jay Luneau, D-Alexandria, is sponsoring measures supported by Edwards and Real Reform Louisiana that Luneau says would mandate insurance rate reductions for widows, veterans, women and the poor.
LABI President Stephen Waguespack has said pushing the tort measures through the Legislature this year was his organization’s chief priority.
In a text message Tuesday, Waguespack agreed with Donelon that the companies ought to reduce rates temporarily.
“The claims data drives the rate calculations,” Waguespack said. “Since claims are down, rates should go down. Similarly, when the Legislature passes tort reform, the number and scale of frivolous claims will go down, which will also drive rates down.”
Talbot, now a state senator, also said the insurance companies should reduce rates.
“It’s very appropriate in light of what we’re all going through with the coronavirus,” he said.
State Farm, with a 30% share, has the biggest slice of Louisiana’s car insurance market, followed by Progressive with 10%, Geico 7.8% and Allstate 7.3%.
“We know our auto insurance policyholders are driving much less than anticipated,” Gina Morss-Fischer, a State Farm spokeswoman, said in an email. “We are closely monitoring our automobile insurance loss trends and are considering how best to take this into account and return value to our auto insurance policyholders. We expect a decision in this regard by the end of the week.”
Jeff Sibel, a spokesman for Progressive, said in an email that the company is “exploring how to best return some premium to customers to reflect the decreased exposure that comes with less frequent driving during the pandemic and expect to have those plans in place soon.”
He said Progressive has already “committed to not canceling or non-renewing any customers’ coverage for non-payment through May 15th and have expanded coverage for customers temporarily delivering food or medicine.”
House Speaker Pro Tem Tanner Magee, R-Houma, is renewing his efforts to centralize sales tax collections in the state, this time taking a sort of backdoor approach.
Magee prefilled House Bill 429 as a constitutional amendment that would allow—but not require—all retailers to remit local sales and use taxes directly to the state for distribution.
The bill is prefaced on a new software program that will be rolling out in July for remote sales tax collections. That software, as it’s being designed now, however, is targeted only for out of state, online sales, due to the current jurisdictional power of the commission, says Luke Morris, assistant secretary in the state Department of Revenue.
Morris confirmed the software is being developed under previous legislative mandates and is directed by the Louisiana Sales and Use Tax Commission for Remote Sellers. The commission is working with a company called Avenue to develop the program, which will require remote sellers to register and file tax returns to remit the exact amount of sales taxes due back to the commission. The commission will, in turn, divide the revenue between the state general fund, at the 4.45% rate, and local collectors based on each parish’s varying rates. The current system collects only a flat 8.45% tax rate. The state’s average combined state and local sales tax rate is 9.45%, according to the Tax Foundation.
Magee’s bill would open up the new software to all retailers in the state, including brick and mortar.
“If they’re doing the website, online software for out of state, why wouldn’t we make it available to all the people who sell stuff in the state, not just online?” he says. “Why have two systems? … Why not give you the option to participate in what other people are participating in?”
As the law stands now, the commission’s jurisdiction is limited only to remote sellers, so that’s what the software is being built for. If the Legislature, and voters, approve expanding the use of the software, it would have to be redeveloped to accommodate the added levels of local tax exemptions, Morris says.
Magee sponsored a bill last year that took a direct approach to creating a centralized system, but it never made it out of the House Ways and Means Committee. That bill was more explicit in removing the full authority of local governments to collect their sales and use taxes.
Magee is hoping that this optional version will make it less objectionable to local collectors and legislators.
“This is getting the same thing through different methods,” he says, essentially “backdooring centralized sales tax collections.”
If passed this go-round, the measure would be put on the Nov. 3 ballot for voters to decide.
The idea of a centralized system has been vehemently opposed by local sales tax collectors and municipal groups like the Louisiana Municipal Association, the Louisiana School Board Association and the Louisiana Police Jury Association, but has been supported by business groups like the Louisiana chapter of the National Federation for Independent Businesses, LABI, Council For A Better Louisiana, the Public Affairs Research Council and the Baton Rouge Area Chamber.
Louisiana and Oregon are the only states that do not have a centralized system for collecting sales taxes.
In the Senate, Sen. Bret Allain, R-Franklin, has filed a related bill that would narrow definitions of what constitutes as a marketplace, marketplace facilitator and seller, remote sale, and remote seller—and sets up the framework for when each entity would register with the commission and remit sales taxes.
Louisiana Gov. John Bel Edwards is calling for a $10 minimum wage in Louisiana, renewing an effort to raise the state’s pay floor that has been stymied since the beginning of his first term.
“We know that an overwhelming majority of the people of Louisiana agree with us on this,” Edwards said Monday.
Edwards endorsed a bill by state Sen. Troy Carter, a New Orleans Democrat, that would raise the state minimum wage to $9 an hour on Jan. 1 of next year and $10 an hour on July 1. The legislation provides for annual adjustments thereafter tied to increases in the Consumer Price Index.
Louisiana does not have a state minimum wage, so the federal minimum of $7.25 an hour applies. Proponents say a higher minimum would boost consumers' buying power, reduce the need for public taxpayer assistance for the working poor, and help people climb out of poverty.
Some economists argue raising the minimum wage leads businesses to hire fewer workers. In opposing last year’s effort, Dawn Starns, state director for the National Federation of Independent Business, said raising the minimum wage could lead to a net loss of 36,000 jobs in the state. Jim Patterson with the Louisiana Association of Business and Industry said that while large companies perhaps could absorb a higher mandated wage minimum, smaller firms could have more trouble.
Critics also warn that raising the minimum wage would lead to increased prices on consumers and benefit reductions for workers.
But Edwards has pointed to Arkansas, saying Louisiana’s neighbor has raised its minimum wage multiple times with no apparent harm to its economy. Carter’s current proposal is more ambitious than the $9 wage floor Edwards supported last year.
Asked why this year’s effort might succeed, given the past failures, Edwards said the legislature’s new members might not have formed an opinion on the issue yet. He said he is urging the public to contact their legislators to request action.
According to the 2019 Louisiana Survey conducted by the Reilly Center for Media & Public Affairs at LSU’s Manship School of Mass Communication, 81 percent of Louisiana residents favor raising the minimum wage to $8.50. Support dropped to 59 percent when asked about a $15 minimum wage. The survey did not ask about wages between those two.
Edwards also supports legislation to protect employees who discuss their pay and ban employers from asking about salary history, hoping to fight pay discrimination and close the pay gap between men and women.
Last year, business lobbyists argued encouraging workers to discuss their salaries would lead to workplace disputes. They said the federal National Labor Relations Act already guarantees the right to discuss pay, so a state-level law was redundant.
Edwards also backs measures by Sen. Jay Luneau, D-Alexandria, that would ban auto insurance companies from setting rates based on certain factors other than safe driving, including gender, military deployment and the fact that a policy holder is a widow.
Republicans are pushing changes to the state’s civil legal system that they say will lead to lower auto insurance rates. Edwards has expressed skepticism about whether such efforts actually help consumers, but says he’s open to having conversations about, for example, lowering the state’s highest-in-the-nation $50,000 threshold for a jury trial.
The administration also plans to call for greater workplace accommodations for pregnant women and review of the state’s rate of maternal deaths. Other legislative priorities will be announced in the coming days, officials said.
The legislative session begins March 9 and must end by June 1.
In his latest changes to a lucrative Louisiana property tax break for manufacturers, Gov. John Bel Edwards managed to irritate a base of his supporters while also failing to win any rousing enthusiasm from the state’s largest business lobbying organization.
The Democratic governor seems to provoke controversy every time he touches the 80-year-old Industrial Tax Exemption Program. And he’s been tweaking the program repeatedly since taking office in 2016.
The program, known as ITEP, gives approved manufacturing facilities exemptions from paying local property taxes for up to a decade.
Edwards has limited the program to an 80% tax break over two five-year terms, instead of a full exemption from property taxes, and he’s required businesses to create or retain jobs with the projects seeking exemptions.
But the adjustment that prompted the largest outcry from business groups involved Edwards giving local governing authorities — sheriffs, school boards, parish councils and other elected officials — the ability to decide if businesses get the tax exemptions. Those property taxes fund local government operations.
Business organizations criticized the local approval process as confusing, complicated and damaging to economic development in a state with an already difficult-to-navigate tax structure. Edwards defended the changes and said the program remains among the nation’s most generous manufacturing tax break. The governor said 39 other states have similar property tax exemption programs requiring local resolutions of support.
Amid consistent complaints about the decisions of local officials, however, Edwards also promised during his reelection campaign last year to consider tweaks to the process. Now in his second term, the governor scaled back some of that local authority he granted.
The latest rule change from Edwards gives businesses whose tax break requests are rejected by local authorities the right to appeal to the state Board of Commerce and Industry to override the denial of the exemption. That appeal right was approved Feb. 21 by the Board of Commerce and Industry, which is packed with Edwards appointees.
Together Louisiana, a group of faith-based and community leaders and Edwards allies, had been influential in the governor’s decision to put limits on the tax break program, urging Edwards in 2016 to give more scrutiny of Industrial Tax Exemption Program applications. The group described the state-level approval process that existed before Edwards as a corporate giveaway.
The governor’s decision to grant an appeal right angered the organization. In a statement, Together Louisiana said the changes “undermine local control over local tax dollars” in a caving to business lobbying groups.
Edwards defended the appeal right as clarifying the rules for the tax break program.
“My commitment to local control over ITEP projects has not wavered,” he said in a statement. He added: “In no way does this action take away the ability of local leaders to approve or disapprove of tax credits. In fact, in the vast majority of cases, I anticipate that the state will not entertain an appeal under this clarified rule at all.”
He said the appeal right comes into play if a company thinks a local authority’s decision conflicts with the state rules for the tax breaks.
The language of the appeal right, however, is fairly open-ended, giving wide discretion to the Board of Commerce and Industry to determine whether a contradiction exists.
Baton Rouge Area Chamber President and CEO Adam Knapp described the appeal right as a “step toward reestablishing predictability and consistency” in the program and reducing “the chaos and confusion of the past four years.”
“Local bodies will continue to have the authority to approve or reject applications, but not the authority to invent new rules for the program,” Knapp said in a statement.
The head of the powerful Louisiana Association of Business and Industry, meanwhile, largely dismissed the appeal right.
In a statement, organization President Stephen Waguespack noted the Edwards administration claims the rewrite “doesn’t change the program much at all.” Waguespack suggested more significant changes are needed to a tax exemption he described as “the most important economic development tool for Louisiana over the past several decades.”
“We urge the administration to continue their efforts to repair this program and stand ready to work with them to get it right,” Waguespack said.
Marrero State Representative Kyle M. Green Jr. wants to raise the state minimum wage to $9 an hour this legislative session with a pre-filed bill.
Others have tried to pass bills to raise the minimum wage from its current $7.25 an hour. Some economists believe raising the wage would be disastrous for Louisiana businesses, passing the cost on to the consumer.
“It is absolutely true that the cost gets passed on,” says Jim Patterson, Vice President of Government Relations for the Louisiana Association of Business and Industry. “If you go to states that have a higher minimum wage, the hamburgers there at McDonald's do in fact cost more there than they do here in Louisiana.”
But supporters of the bill disagree. “The idea that a modest increase in the minimum wage somehow hurts the economy, somehow kills jobs, is not only nonsense, but it’s nonsense that is disproven by all the evidence we have around the country,” said Jan Moller, Executive Director of the Louisiana Budget Project.
The bill will be discussed during the 2020 Regular Legislative Session on March 9th.
Though pleased with one of the “process changes” Gov. John Bel Edwards’ administration hopes to make to the Industrial Tax Exemption Program, local business and industry organizations say any further potential changes merit greater industry input.
Edwards’ administration is pushing to prevent local governments from instituting blanket bans on exemptions for projects that are already completed or under construction. Such a tweak would directly impact Baton Rouge, which adopted guidelines that prohibit exemptions for work that has already been completed. (This played out last year when two requests from ExxonMobil were rejected, largely because the company had already finished the project.)
The anticipated move is among several being spearheaded by Louisiana Economic Development. It comes as a relief to business and industry leaders, who have argued the program, since being overhauled by Edwards in 2016, brings a great deal of uncertainty to large companies looking to locate in Louisiana.
“I’m glad the administration realizes ITEP is in need of major repair, but I hope they’re willing to work with everyone—not just local governments and Together Louisiana,” says Stephen Waguespack, LABI president and CEO. “There needs to be input from business and industry so we can get this working again, and we’re ready to sit down whenever they’re ready.”
Adam Knapp, president and CEO of the Baton Rouge Area Chamber, argues the potential tweak is really a clarification of existing rules.
“The ITEP rules have been in place for years now,” he says. “This is not a change in interpretation; it just hasn’t been executed at the local level with fidelity to what the state created.”
At the heart of the issue, says Knapp, is one question: Who creates the rules for the program—the state, or the local governing authorities? The state technically governs ITEP, but local communities, whose taxes are impacted by the program, have been allowed to create conflicting guidelines, which Knapp says have occasionally superseded even the governor’s authority and need to be corrected.
Connie Fabre, president and CEO of the Greater Baton Rouge Industry Alliance, says her organization has been facilitating group discussions among ITEP stakeholders, who eventually plan to come forward with some proposals on their own. Chiefly, they believe the public needs to be more educated on the ITEP process and why companies would request an exemption even after their project is complete.
“Companies seeking ITEP have to file an advanced notice first, and sometimes they can’t calculate the value of the incentive until the project is built,” Fabre says. “It’s better to be working with the most accurate numbers possible, especially if they’re getting an incentive for it.”
The plans are also floating amid reports showing Louisiana lost 7,000 construction jobs last year. David Helveston, president and CEO of ABC Pelican, says, while at a high level, he “applauds the administration’s effort to provide clarity and some uniformity to the process,” his construction firm members crave “a key, single decision-maker at the local level rather than three,” which they believe would allow for a smoother and more efficient process.
Stephen Waguespack from LABI joined us and provided numbers from the Revenue Estimated Conference. He said this conference contains a small group of people that gather to look at revenue and determine what the State’s budget will be in the upcoming year. They did not come to an actual number and plan to wait a little bit longer before providing an estimate in order to be more accurate. Waguespack also discusses who the leadership in the next Legislative Session could be. He says that Sherman Mack from Livingston Parish has secured enough votes to become the next Speaker. Stephen details Sherman’s experience and how he would do as Speaker.
Throughout his re-election campaign, Gov. John Bel Edwards has touted Louisiana’s fifth-lowest state and local tax burden as one of his administration’s accomplishments. It's a claim, critics say, for which he should not be taking credit.
Edwards recently tweeted, “When I became Governor, we had the 5th lowest combined state and local tax burden in the country. Today, we still have the 5th lowest combined state and local tax burden.”
In response, Jared Walczak, director of State Tax Policy at the Washington, D.C.-based Tax Foundation, replied, “Governor, while Louisiana's tax burden is moderate, the reason the state's ranking has remained constant is because we discontinued the study you cite several years ago, and the most recent figures are for FY 2012.”
When asked to respond, Edwards’ campaign told The Center Square that Edwards is referring to a March 2019 USA Today story, which says Louisiana was fifth lowest behind Tennessee, Wyoming, South Dakota and Alaska for overall tax burdens.
The USA Today story, however, says it relies on 2012 data from the Tax Foundation, a Washington D.C.-based nonprofit that analyzes taxing and spending policies at the local, state and federal level. The Edwards campaign did not directly respond to the Tax Foundation's criticism.
Louisianans overall paid 7.6 percent of their income in 2012, according to the USA Today analysis. Broken down by income per capita, Louisiana ranked 11th lowest in 2012; by income tax collections per capita, 13th lowest; by property tax collections per capita, 8th lowest; and by general sales tax collections per capita, 14th lowest; USA Today reports.
But 2019 Tax Foundation rankings show that Louisiana has on average the second-highest sales tax rate in the U.S. (9.45 percent when local income taxes are included), the second-highest personal income tax ratein the South, and the highest corporate income tax rate in the South, and among one of the highest in the nation.
A 2018 WalletHub study ranked Louisiana’s tax burden 27th, with an overall tax burden of 8.43 percent.
Both the 2019 and 2018 Tax Foundation State Business Tax Climate Index ranked Louisiana 44th. While its “sales tax rate nudged down, a convoluted tax code with high rates still has the state at #44,” the foundation says.
The foundation also ranked Louisiana 36th for corporate taxes, 32nd for individual taxes, 32nd for property taxes, and 4th for unemployment insurance taxes.
The index analyzed five variables, noting that states’ rankings can also rise or fall based on reforms implemented in other states. States are rewarded for transparency and neutral tax codes and penalized for having tax codes that are burdensome, complex and economically harmful, according to the Index.
Louisiana's low business climate ranking comes as no surprise, Jim Patterson, vice president of Government Relations at the Louisiana Association of Business and Industry, told The Center Square, because of “massive tax increases legislated against businesses in 2015 and 2016 and supported by John Bel Edwards as a state representative in 2015 and as governor in 2016.”
According to Legislative Fiscal Office projections, these new taxes on Louisiana businesses account for new tax revenues of $575 million in 2016, $1.3 billion in 2017, $1.3 billion in 2018, $884 million in 2019, and an estimated $922.5 million in 2020, $968 million in 2021, $974 million in 2022, and $995 million in 2023.
That's more than $7.9 billion during this 8-year period, Patterson notes.
“Not only does Louisiana have proportionately higher business taxes than most states, along with some taxes (inventory, franchise, manufacturing utilities) that are not paid by businesses in most states,” Patterson added, “but our state also saddles businesses with administrative red tape that doesn’t exist in other states. A glaring example of this is our requirement that local sales taxes be paid to some 58 local sales tax collectors across Louisiana. Whereas all but one other state have a single point of collection for local sales taxes.”
Louisiana did show signs of economic growth according to the most recent report released by the Bureau of Economic Analysis (BEA). Louisiana’s real gross domestic product (GDP) increased to 3.8 percent from the previous quarter’s 1.9 percent, the ninth best showing in the country for the period.
All 50 states and the District of Columbia reported increases in the first quarter of 2019, BEA notes.
Stephen Waguespack, President and CEO of the Louisiana Association of Business and Industry, talks with 101.7 / 710 KEEL's Robert J Wright and Erin McCarty about the final days of this year's legislative session, including a bill from Shreveport's Barrow Peacock to defend state taxpayers.
The bill, SB198, has passed through the House of Representatives and now goes back to the Senate for final action.
More details from Waguespack and LABI:
“SB198 by Senator Barrow Peacock passed the House by a vote of 97-1 today. The bill now returns to the Senate to concur in the House amendments and send it to the governor's desk to become law.
SB 198 will clarify that taxpayers can pursue a refund claim when there is an overpayment of taxes that were not legally due to state government. Without this bill, the government stands to unfairly benefit from taxes collected illegally from these Louisiana families and companies who may not have the knowledge and resources to pay taxes under protest, file a lawsuit or pursue a claim against the state.”
By: Stephen Waguespack
When it comes to tax increases, the last three years in Louisiana have produced one batch of bad news after another.
Nine legislative sessions in three years. Several billion more tax dollars paid. All in the name of funding a state government budget that has grown more than $5 billion since 2015. While everyone wants to do their part to help government function appropriately, the overwhelming focus lately on more taxes rather than government reforms to accomplish this goal has been frustrating for everyone.
Let’s face it: we all are due for some good news on the tax front.
Last week, some of that much needed good news was finally delivered when the Louisiana Supreme Court ruled in Smith v. Robinson that a 2015 tax imposed by the state is unconstitutional. According to the legislative fiscal analysis, the total amount of unconstitutionally collected tax should be roughly $70 million (though the Department of Revenue has yet to release an official amount.)
Think about it… after all of the taxes raised over the last few years, $70 million can now be returned to Louisiana taxpayers. What a boost that will be to job creators trying to compete in a tough economy, especially those small businesses facing tight margins, rising insurance costs and one new tax after another.
Even beyond the value it will provide to the economy, the merit for returning that unconstitutionally collected money should be crystal clear.
The Court was adamant this tax was a blatant violation of the Commerce Clause of the U.S. Constitution, a ruling which should have come as no surprise to many in the State Capitol. Act 109 was opposed by many organizations, including the Louisiana Association of Business and Industry (LABI), during the 2015 session because experts believed it unfairly taxes Louisiana income multiple times. In fact, Senator Barrow Peacock (R-Bossier City) clearly shared the legal problems with the bill during debate on the Senate floor at the time (click HERE to watch).
Act 109 limited the tax credit for taxes paid to other states, disallowing credits for taxes imposed on net income paid to states that do not have a reciprocal credit. In effect, some Louisiana residents who own interests in certain LLCs or S corporations doing business here and in Texas became subject to multiple taxation on the same income.
Although Texas does not have an income tax, it does levy an entity-level franchise tax based on the gross receipts of businesses operating in Texas. Because income earned and taxed in Texas flows through to a Louisiana resident individual income tax return, disallowance of the credit resulted in Louisiana taxing that same income a second time.
In plain English, the state messed up and collected taxes that it shouldn’t have. And these aren’t from big multi-national corporations. These are Louisiana home-grown companies that are located here but also have some business in Texas and other states. These are the Louisiana service companies all throughout Acadiana and the Bayou who have been working in Texas to make ends meet. These are the Louisiana contractors building facilities across the south. These are Louisiana small businesses following customer demand, trying to expand their market share and keep their workers employed. These companies have been forced since 2015 to pay taxes twice on the same income, and the Court finally put an end to this unconstitutional tactic.
Where is the bad news to this you may ask? Well, thus far the state says it has no plans to give most of that money back to the taxpayers.
In fact, Governor Edwards’ Administration said this week they only plan to reimburse about $23,000 of the unconstitutionally collected tax. That is less than one percent of the total estimated amount collected. This is simply not fair.
Their argument is only those few taxpayers who filed their tax “under protest” would be eligible for a refund. If this position continues, it means a taxpayer would have had to have been Nostradamus the last few years and file these specific taxes under protest in order to be protected from an unconstitutional tax.
Do we really want policymakers in the State Capitol to think that they can just pass a tax that may be unconstitutional at any time they need revenue… keep it quiet and collect as much as they can as long as they can until the Court steps in to stop it… and then keep most of the money they’ve collected?
If this type of burden on the taxpayer is allowed to stand, Louisiana businesses would be wise to simply file every tax under protest from this point forward in order to reserve their right to be protected from actions that may eventually be found unconstitutional. Does the state really want to promote that type of behavior?
The Administration and Legislature need to right this wrong. They should do everything they can to reimburse people who were double taxed. Mistakes happen, but when found, they must be rectified rather than swept under the rug.
But just in case they don’t, taxpayers need to take steps now to protect themselves.
LABI urges Louisiana businesses operating in multiple states to immediately contact a tax professional for advice on next steps. The state Constitution says the Legislature “shall provide a complete and adequate remedy for the prompt recovery of an illegal tax paid by a taxpayer.” There are existing procedural remedies available in order for taxpayers to protect their interests in such situations. If these remedies don’t do the job, then the Administration and Legislature always have the authority to provide a new solution when needed. They should make it a priority to find a solution in this case.
This ruling by the Louisiana Supreme Court is some long-sought good news for Louisiana taxpayers, but it won’t mean much if the Administration and Legislature think they can just keep the cash if they ever get caught doing something like this again.
By: Stephen Waguespack
For almost three years, the state Capitol has been absolutely, positively one thing: chaotic.
The 6th special session during this time-period begins this week and will once again pit the Administration’s desire for tax revenue against the Legislature’s lack of consensus on that very topic. This plotline should sound familiar by now.
The governor’s position is clear. He wants to raise at least $650 million (thankfully down from the $1.2 billion he requested earlier this year) and explicitly notes he has no strong preference as to how to get there. Sales taxes… business taxes… personal income taxes… economic development incentives… whatever. Roughly any tax will do, as long as it brings in enough green for government.
The Legislature’s position is less clear. Some members are against any new tax… others would gladly support all of the above… and many others are simply trying to plow through the rhetoric and find the best possible balance of spending cuts and new revenue. Since most of the bills to drive efficiencies through reasonable governmental reforms unfortunately died in the last session, new taxes will be the name of the game this time around.
That’s the revenue summary… but what about the spending side?
When the governor introduced his budget in January, he openly encouraged the Legislature to ignore it, stressing there wasn’t a single cut in his budget proposal he wanted them to keep. When the House took that advice, and rewrote their budget version, the governor sent out 37,000 letters to nursing home residents and other Medicaid recipients to tell them their services were soon to be cut, and they should prepare accordingly. The Senate then “prioritized life” and filled all those health care cuts with existing resources, seemingly easing the concern created by the press conferences and letters. However, late last week, this budget solution was vetoed by the governor.
Now, without an approved budget document in hand, no consensus on amounts and types of taxes needed and only a two-week special session to hammer it all out, the stage is set for a hectic race to the July 1stbudget deadline. Caught in the middle are not only the 37,000 letter recipients and taxpayers of all varieties, but also many other critical entities like hospitals, universities and TOPS recipients.
Meanwhile, outside the state Capitol, our economy has some challenges.
Recent data from the U.S. Bureau of Economic Analysis shows Louisiana is one of only eight states to have a reduction in real personal income from the previous year; our drop being the third largest decline in the nation. The continuing manufacturing boom in Lake Charles brought in a 4 percent income jump from the previous year, helping to offset the slow growth seen in other areas. The Lafayette and Houma areas were the largest declines, coming in at a reduction of 7.5 percent and 6.7 percent respectively. We now have the lowest workforce participation level seen in this state in decades, and the lowest GDP growth in the nation.
This session, lawmakers and the governor must proceed carefully with our fragile, service-based economy. Louisiana’s reliance on business taxes as a share of total state and local tax revenue is already 13th in the nation, with employers paying roughly 48 percent of all taxes in Louisiana, a ratio higher than the national average. Businesses also pay a majority of property taxes collected in Louisiana and do so at a rate 50% higher than individuals.
Ironically, some of the job creators choosing to invest most in communities around the state are the ones most under attack by the Capitol. For instance, manufacturing currently accounts for more than 20 percent of the total output in the state, with an average compensation of $85,000, almost double the average wage offered in Louisiana. Including Louisiana, only three states in the country impose a sales tax on manufacturing raw materials, only nine states tax manufacturing machinery and equipment (MM&E) and just 12 states tax manufacturing utilities. LSU economists predict an increased MM&E sales tax in Louisiana would lead to a potential loss of $19 billion in planned projects and the immediate reduction in maintenance and turnarounds, resulting in $6.9 billion in lost earnings for workers and $414 million in foregone state taxes.
This is all to say, Louisiana desperately needs more good-paying private sector jobs and how lawmakers structure this new round of taxes will go a long way towards deciding if that can happen.
Tax reform is a term often used by politicians and pontificators in terms of how government can best squeeze more funds out of our fragile economy. It sure would be nice if every now and then it was instead described in a way to create more jobs… with more pay… for more people. The goal of stabilizing government doesn’t have to be at odds with the need for economic growth.
The inventory tax hikes of the last few years have caused inventory to leave the state, taking corresponding jobs with them. The caps on net operating loss (NOL) deductions have hit folks trying to recover from floods and storms. The industrial tax exemption program changes have caused confusion and led to an immediate and substantial reduction in the number of applications filed, meaning new investments are likely going elsewhere. Any new taxes passed this session must be carefully crafted or they will run the risk of placing further drains on a limping economy at a time we can obviously ill afford to do so.
Everyone wants to do their part to end this frustrating era of state government. New sales taxes of some variety seem likely to happen this session and we, at the Louisiana Association of Business and Industry, will work in good faith to help policymakers throughout this process. But they must proceed carefully. There is no doubt, government deserves some much-needed relief from this chaos… but many Louisiana employers and working families probably deserve it even more.
By: Stephen Waguespack
It has become a new national pastime for folks to spend time bemoaning the rise of “partisanship” and to complain about how divided the country has become. This mantra has been bought hook, line and sinker by both the left and the right. Partisanship and petty politics are often blamed for all that ails us, even though the unsolved societal problems usually referenced as proof have been around for generations. Ironically, the political figures that tend to rail the loudest against partisanship are those that seem to practice it the most.
It is a common refrain for liberals to say how easy it would be for new taxes of any kind to solve most of our long-standing problems and that anyone who refuses to rubber stamp this concept is a partisan hack. On the opposite end of the spectrum, many conservatives preach ad nauseam about how easy it is to slash our way to prosperity and that any government program with an ounce of waste is essentially garbage just as worthy of some back-alley dumpster as yesterday’s crawfish shells. Both sides have passion and conviction behind their arguments and see little reason to consider any other option than the one to which they loyally subscribe.
People in the real world are forced to pick a side and usually have limited trustworthy information on which to do so. Perhaps it is time to smoke out both sides and see once and for all who is right and who is full of it. Technology can help pave the way.
The state of Ohio implemented a new website a few years ago called www.OhioCheckbook.com. This groundbreaking site uses an affordable and user-friendly software system that puts all state (and most local) government spending online in an easy to use format. The information can be accessed and understood by anyone with a computer or phone and shared via social media with one click of a button. As a result, taxpayers in Ohio can not only buy a movie ticket on their phone in the carpool line…they can also see in real time governmental balances, contracts, salaries, debt, pension obligations and other spending units. Governmental accountability has evolved with the times in Ohio…it’s time for Louisiana to do the same.
The Louisiana Association of Business and Industry (LABI) is part of a growing coalition pushing hard for this to happen here also. All the information needed to learn more about the topic and how you can help can be found at www.LouisianaCheckbook.com. Check it out today and make your voice heard by taking that first step of signing the petition.
This issue should be good politics for everyone. It should be the one issue that finally breaks through the partisan gridlock and settles once and for all where the rhetoric stops, and reality starts.
Liberals should be excited to implement the checkbook.com model here in Louisiana because it should factually show how efficient government is today and how desperate it is for more money. Pension systems should want these details online to show how affordable they are just as much as local government should want to embrace this to justify their next tax referendum on the ballot. Conservatives should cherish the opportunity to identify those long-elusive specific cuts they hope to find and see this technological solution as the way to do so. The media should be going hog-wild to get this done as it would provide ample fodder to fill their pages and generate clicks. The only folks that should be opposing it are those that benefit from government spending your money in the dark of night.
Let’s let the facts speak for themselves. No more hide-and-seek and spin-laden press releases to explain how government uses the money we give them. Put it all out there in an easy to use website and let the people decide once and for all who is right.
This special session, bills will be filed to implement the checkbook.com model in Louisiana. LABI, along with many other business and good government groups, will be working hard to get it done… but we need your help to do it.
The status quo and other advocates addicted to that tired old “partisanship” excuse will find every reason under the sun to kill this without being honest about their rationale for doing so. Stories of it being too expensive are already being sold, though the architects of the Ohio model have made it clear those talking points are bogus. The Governor’s executive order calling for the special session seemingly tried to limit the ability to implement this reform with fidelity, but these obvious attempts to shield government spending at local, judicial, legislative, and boards/commission levels from taxpayer scrutiny should be rejected.
Accountability is the new normal. With technology, no one can hide from anything anymore. Camera phones are everywhere, and everyone knows secrets are one click away from becoming common knowledge. Regular people in the real world have learned to live under this new reality. It’s time for government to get with the program.
No excuses. The politicians need to quickly and vigorously implement www.LouisianaCheckbook.com or finally come clean with what they are hiding if they refuse to do so. It’s time to demand this level of accountability for government at all levels. It’s time to smoke ‘em all out.
By: Stephen Waguespack
The 2018 crisis will be filled with plenty of drama, finger pointing and inflammatory rhetoric. Every (former, current and future) politician will say it is the other (former, current and future) politician’s fault for the deficits and lack of agreement on the appropriate mixture of taxes and cuts to fill it.
Pull some old Public Affairs Research Council of Louisiana (PAR) reports or Advocate headlines over the last 40-50 years and you will read a similar version of the same fights. Close your eyes and listen to some old political speeches and legislative debates on the Louisiana Public Broadcasting (LPB) website and you will swear the commentary is filled with the same words used today.
The truth is Louisiana has always faced some version of this fiscal cliff dating back to the economic crash of the 1980s. The only thing that has ever interrupted some version of this same old debate has been those few times Louisiana had a big influx of federal cash and collections from a false economy due to a major storm.
Our track record is clear. The same problems have been around for decades. The government designed by Huey Long and enshrined in the Constitution by Edwin Edwards is bankrupt, and all the taxes in the world won’t permanently fix our problems.
Taxpayers no longer trust government to spend money wisely. That trust must be rebuilt. It seems for that to happen; a whole new approach must be considered.
Government must stop growing so fast and actually shrink to become more in line with our economy. State government must cede some of its power and authority to local control. Taxation should be collected and kept close to the people. Spending must be more transparent and accountable at all levels. Unnecessary boards, commissions and fiefdoms should be disbanded. Many of the dedicated funds should be eliminated, thereby allowing those dollars to flow to priorities like education and health care. Medicaid spending increases must be contained, and smart reforms like work and training requirements must be implemented. Governmental pension plans should evolve to a more market-based approach just as private sector pension plans have done.
On taxes, the state must become more competitive so we can attract more jobs and investment. Any exemption or credit eliminated should be used to lower tax rates rather than just prop up unaffordable and unreformed government programs. A centralized collection system, like that used in other states, should be implemented. Income taxes target working families and drive away jobs and capital to other states. A better mixture of property and sales taxes similar to Texas and Florida, instead of income taxes, should be considered.
In the near term, for this session, it sounds like the Governor and legislative leaders are starting to lean towards a revenue solution using sales taxes rather than income taxes. While some cleaning of existing pennies is sure to be considered, they are almost certain to also renew at least a portion of the 5th state sales tax penny (this according to the House Democratic leader).
Either way, for argument’s sake, let's say they end up agreeing on some way to replace the expiring $880 million from the 5th penny. If so, they should not just dump that money back into a bloated, inefficient government. Instead, they should spend it more strategically this time around.
One such way to allocate these dollars would be along the following lines:
This type of tax allocation would address the cliff by doing the following:
If this plan happens, taxpayers will pay the same amount they are paying today but instead of broken government they will get:
This should be tied to the passage of the following bills:
These are just a few thoughts. Maybe others have a better idea. If so, that is great. We at LABI are ready and willing to work with anyone on a real, long-lasting solution to the state’s long-term spending and tax code problems. We want to work with anyone ready to roll up their sleeves to fix this problem once and for all. Anyone from any political party is welcomed. Any politician still focused on the same old blame game hot-air spin used to confuse voters for generations need not apply.
By: Stephen Waguespack
It’s a phrase frequently promised by politicians regardless of political ideology. No matter if you are a liberal, a conservative or identify as an independent voter, you probably want it also. In fact, who in their right mind would not want something called tax reform?
We all hate taxes, especially ones that seem arbitrary and are used to pay for the wrong things, and we assume reform of our broken tax code would lead to a better approach.
The catch is politicians all mean different things when they say “tax reform,” and it is often quite challenging for us all to know exactly what they intend to accomplish when they say it.
In D.C. last month, Congress passed their version of tax reform, and they were clear in their approach. They eliminated some exemptions and credits and used those savings to lower tax rates across the board.
The immediate result?
A surging stock market…companies of all sizes announcing plans to raise wages…give bonuses to workers…enhance 401k retirement plans…invest in new equipment…and even donate more to charity. Our economy and workforce are already benefiting because government finally allowed folks to keep more of their hard-earned money.
In the coming weeks, it will be Governor Edwards and the Legislature’s turn to decide how they will define “tax reform” here in Louisiana.
This summer, the $1.1 billion in temporary taxes proposed by the Governor and passed by the Legislature in 2016 will expire. This two-year bridge was intended to give elected officials the time needed to conduct a deep dive and learn how our government works and how it could be made more efficient and effective. It was never intended to be just a temporary tax bridge to permanent new taxes. The assumption was that this new long-term plan would be more comprehensive than just more taxes to fund the same old government model we have had for decades.
So, what’s the long-term plan they came up with after two years of planning?
Well, a few weeks ago, the Governor announced his plan, and it is unfortunately once again a tax-only solution to government shortfalls. Specifically, he proposes to use a combination of personal income tax increases and sales tax expansions to replace the current expiring taxes and fund government roughly as we have always known it.
While there are many questions that need to be answered by the administration as to who it is specifically targeting with these new tax shifts and how it compares to other states, the takeaway is fairly clear: This plan calls for many new taxes to replace some old taxes. No real spending cuts…no real government reforms.
There has to be a better way.
The Legislature clearly has its role during the session to closely examine all proposals, but the executive branch is constitutionally in charge of the agencies that spend all this money and should be able to recommend some ways to get more taxpayer bang for the buck. In the last two years, were there really no new ideas formed to demand more efficiency and effectiveness from our agencies and bureaucracies? No ideas that focus more on shrinking government rather than shrinking take-home pay for working families and small businesses?
Congress clearly defined tax reform with a new approach, and it didn’t take two years and a myriad of task forces to do it…they drove a solution that finally put the needs of the people ahead of the wants of government…and one that is clearly showing some early positive results for job creation, wage escalation and private sector investment.
We can do something similar to Congress here in Louisiana. It’s not too late. Just because taxing and blaming the private sector for the problems of government has always been a “go-to” move for Louisiana politicians doesn’t mean it has to stay that way. It’s time to throw away that playbook forever.
The two-year bridge set a clear expectation that this plan would be more than just tax shifts. The expectation was that any tax proposal at this point would be a component of a broad, comprehensive plan to redesign government and make it more responsive to taxpayers.
This session, any final plan must include more than just tax shifts. It must include significant transparency of all spending at all levels of government, a rock-solid mechanism to control future government spending growth and the repeal of a host of statutory funds that wall off dollars from higher education and health care. It must kick off the process to modernize expensive legacy programs such as Medicaid and the state’s pension plans and make them affordable and viable for future generations. The model of government created by Huey Long – which relies on patronage, excessive political power and the heavy hand of state government far too much – must be holistically transitioned to a system that embraces the principle of local control and taxation closest to the people.
No doubt, these reforms are hard to implement, but we have to start this process at some point. That is why a two-year bridge was given to prepare for this moment. The time was given to prepare…and the time is now to implement.
By: Stephen Waguespack
Each year on April 15th, you can easily get overwhelmed when trying to personally file your taxes. Am I eligible for a certain tax credit? Do I have the right documents to justify all my expenses and charitable donations throughout the year? Did I fill out my HSA information properly? Am I correctly claiming my medical expenses? The list goes on and on. The same compliance nightmare awaits small business owners, many of which operate within extremely tight margins and are unable to afford a tax professional.
The time is right for smart tax reform that will end this annual nightmare. America can no longer limp along with little to no economic growth. Our businesses, both big and small, need to once again be able to compete with the rest of the world for jobs and investment.
Smart tax reform begins with tackling the complexity of the code itself. The Internal Revenue Code has grown to 2.4 million words, with a mind-boggling 7.7 million additional words of regulations to ‘clarify’ the code. However, clarity is the last thing anyone would accuse the American tax code of having. It is unrealistic to expect most individuals or business owners to comply with this mountain of confusing and conflicting tax legalese and regulations, despite their best intentions.
The White House, the House Ways and Means Committee and the Senate Finance Committee recently released their framework for tax reform, which lays out the key principles that would touch every citizen in the U.S. and businesses, large and small. The Louisiana Association of Business and Industry is a strong voice among other business groups around the nation who are loudly imploring Congress to reform the U.S. tax code by making it more competitive, predictable and understandable. Our tax code should promote private investment rather than punish it. You shouldn’t have to be a CPA or hire a team of expensive experts to file your taxes.
Small businesses, which serve as the backbone of our economy, are most dependent on smart tax reform. At least 75% of small business owners (think dry cleaner, restaurateur, homebuilder, hardware store owner) file their taxes as what we call a “pass-through,” or on the individual level. They are not set up like a corporation, so they don’t follow the corporate tax structure. It puts small business owners in a unique situation. They must file business tax forms on top of their personal tax forms and can even pay at the highest tax rate for individuals, a 39.6% marginal rate.
Simplifying the way that they file their taxes would be a welcome relief for the little guy. If you are a sub-chapter S corporation, the Tax Foundation notes that annually this one tax treatment spends 889,393,518 hours on tax compliance, equating to $46,292,932,612 for paperwork; roughly $12,000 a year for each business. These hours and dollars spent would be much better invested in our local communities rather than in unnecessary compliance.
In addition to compliance challenges, there are a few other critical principles we urge Congress to follow in reforming the tax code to best help business owners invest back into their business and grow the economy.
Repeal the Alternative Minimum Tax (AMT): The AMT may have been designed as a sneaky way to go after higher income individuals, but what it really did was discourage growth and inject massive complexity into the tax code by requiring many to file their tax returns twice.
Repeal the Death Tax: This unfairly combines the only two things certain in life: death and taxes. This archaic provision punishes success and encourages convoluted planning, often targeting small, homegrown businesses that simply want to continue a family tradition upon the death of a loved one.
Change the tax structure for Small Businesses: Limit their top rate to 25% and figure out a way for them to file taxes as a small business owner and not on top of an individual tax filing. Lessen their rate and simplify their form. We want more small businesses, not less of them, though you would never know it by our tax code.
Expense Capital Investments: Provide needed relief for small business owners by allowing them to immediately write off the cost of new investments, while also lengthening the time to do so and broadening the scope of eligible assets. This will help small businesses invest in the new equipment needed for production or to enhance services.
These principles are critical components of any tax reform intended to help small businesses compete in the modern economy, a goal we must embrace since these owners employ more than 50% of the state and nation’s workforce.
The president and Congress have a moment in time to make a real change, leave a lasting mark and have a positive impact on the economy for generations to come. Tax reform provides the perfect opportunity for Washington to send a clear signal that they, despite popular belief, can still get big things done. This would encourage international markets, inspire domestic voters and hopefully incentivize states like Louisiana to also embrace smart tax reform that simplifies our code, lowers our rates and unleashes the beast of economic growth.
By: Stephen Waguespack
As the pressure mounts on the media for social media clicks and reader attention in a highly competitive marketplace, anonymous sources have become more frequently used by some writers to get stories out quickly and sell certain controversial narratives. The excessive use of these types of sources, once considered taboo by most journalists and journalism schools, has unfortunately become much more commonplace. Whether productive or not, this atypical approach to traditional journalism appears to be a growing trend.
Keeping with this new trend, we at the Louisiana Association of Business and Industry (LABI) put out a call to our members to submit anonymous feedback to the Governor’s recent Commercial Activity Tax (CAT) proposal. Their comments have been startling.
As a reminder, the CAT – generally referred to as a Gross Receipts Tax – would raise roughly $900 million by taxing the gross revenue of a company regardless of profitability. Gross receipts taxes are often compared to an expanded sales tax, which applies not only to the final sale but to all transactions including intermediate business-to-business purchases of supplies, raw materials, services and equipment.
These are some of the responses we received from small and medium-size family-owned, Louisiana-based businesses:
Anonymous Louisiana Employer #1: “We will be directly affected by this new tax if the bill is enacted. Our governor did not consider that all the cost will be passed on to our customers. If any cost cannot be passed through it will result in job layoffs.”
Anonymous Louisiana Employer #2: “The Governor’s CAT idea will be devastating to my business… Most of our competition is from other states and this CAT tax on us will make us uncompetitive in an extremely competitive market… We have already had a small layoff this year and are struggling to make enough sales to keep our people employed… As the owner of a business that has been struggling to rebound from the recession of 2009-2010, struggling with all of the costs to business added during the Obama Administration, severely impacted by the decline in Petro-chemical work due to depressed oil and gas markets, this type of additional business taxation may be the last nail in our coffin. We employ between 125 to 150 people, some with limited skills, who would have very limited employment possibilities in [region of state] if not for [company name]. We love our state and are proud to have provided a decent livelihood to hundreds of employees over our 43 years of business and are very frustrated that our current administration believes that we have not adequately contributed to our state’s finances. We are not a “Wall Street” business or “large corporation” that the Governor believes has raked in millions upon millions of untaxed dollars. We struggle each year to invest in teaching skills to the unskilled, to invest in equipment and technology that will keep us competitive, to invest in our community to provide better quality of life to our employees and neighbors. It makes NO SENSE to further hinder our ability to compete and remain in business in order to provide more money to our government who will not address the root causes of our economic mess.”
Anonymous Louisiana Employer #3: “It seems the unintended consequences out-weigh the intended consequences to me. We will drive companies out of the state or just have them shut down. Then the State loses what property, occupational, and sales taxes they were paying. It also sends a message to a company wanting to come to LA to stay away as this State will tax them more than other states. When some of the current businesses fold, then the State loses the taxes they were paying also and the State may have to pay unemployment monies to these people now unemployed. So how does this really help the State?”
Anonymous Louisiana Employer #4: “Honestly, I’m tired of the government immediately coming up with new taxes when it needs money. Instead of looking within their own house at how much money is being misspent, wasted, and otherwise poorly managed, they keep expecting citizens and businesses to cough up more cash when they are already strapped. They treat us like a money tree… It’s unsustainable.”
Anonymous Louisiana Employer #5: “We are on the verge of moving our business to either Mississippi or Texas. Louisiana has become an unwelcome place to both live and work.”
Anonymous Louisiana Employer #6: “As a CPA in the practice of public accounting for the past 30 years, I have not before seen a more regressive tax proposal from our sitting Governor and State Legislature. This CAT tax proposal is no more than a money grab and it must be stopped… Many of the small businesses in our area are hanging on by a thread hoping for better days… No one should be fooled into thinking this CAT tax is only a tax on large businesses. With the CAT tax kicking in at $150,000 of gross receipts, it will hit almost all small businesses.”
Anonymous Louisiana Employer #7: “As everyone with a touch of business knowledge is aware, the amount of gross receipts a company generates does not guarantee net profits, especially with the current climate in the oil and gas arena. This CAT will increase the vulnerability of well established companies who are just trying to wait out this latest collapse in our industry as well as discourage new businesses from moving into our state.”
These are real comments, from real Louisiana people who are paying federal, state, and local taxes and trying to invest, hire and grow in the state they love. They are tired of getting blamed and targeted for problems they did not cause. They are not big companies and they are not partisan or political. This is their voice. It is time to listen to their message.
By: Stephen Waguespack
Here we go again.
In just a few weeks, the Legislature will be back in session. It has only been a month or so since they met and addressed the most recent shortfall, which was the 15th mid-year deficit since 2009. For decades, annual deficits have become commonplace with the exception of times with hurricane recovery dollars or oil booms.
It’s a fact that most of the issues teed up for discussion in 2017 will be remarkably similar to topics debated in the Capitol time and time again throughout the years. Once more, Louisiana’s elected officials will discuss how to stabilize our budget and how to improve our schools, roads, legal climate and economy. Once more, Louisiana’s employers will be unfairly blamed for the state’s budget woes, even as exemptions are plummeting and tax collections are up substantially as a result of the laws passed in 2015 and 2016.
Some issues, like criminal justice reform, have the chance to break through the annual stalemate of repetitive debates and become a noteworthy exception to the rule as a new idea to an old problem that actually becomes law. However, let’s be clear. Without strong leadership driving big, specific transformational changes, it is nearly impossible to expect new results that stop the decades-long theme of low national rankings for performance, the cyclical path of a boom-or-bust economy and unstable government budgets.
In Washington right now, the conversation – and the action – is about reducing burdensome regulations that stifle economic growth, reforming a broken tax code to be globally competitive, re-evaluating trade negotiations to give Americans a fair deal, improving infrastructure and being aggressively innovative in education. Here in Louisiana, we’re focused on the same old, same old – how to fund an ever-expanding state government, spread the soup as thin as possible, to be as many things as we can to as many people as possible. Even as job losses pile up, state leaders continue along with the same old plan, consumed with what’s happening with government programs, seemingly much less interested in the tax-paying public that is working hard and funding the state’s bills.
As I travel the state this week, it’s clear that many people are not aware that just this year, Louisianans will pay $1.3 billion more in state taxes than what we paid in 2016. Major business exemptions – often incorrectly blamed for the state’s budget problems – have been reduced by over 50% in just one year. Yet the deficit remains because the state budget overall is growing at a far faster pace than our economy and tax base.
Not only is our state spending high compared to historical norms, but it’s high compared to our peers in the South. US Census data shows that Louisiana spends dramatically more than the average of other southern states. Many of these dollars are going to programs the politicians never want to discuss. Dedicated funds wall off over $4 billion from any real oversight or scrutiny. Another $2 billion is for the state’s cost share for retirement plans that government refuses to reform. Many boards, commissions and other fiefdoms sit on auto-pilot budgets that should be analyzed for relevance and need.
Contrary to what you may read, the state’s Medicaid program is the largest cost driver in the state’s budget. Legislators have discussed ad nauseam whether to expand Medicaid, but unfortunately there has been no real debate on how best to reform it. Even before the Governor’s decision to expand Medicaid under Obamacare, the Pew Center reports that Louisiana’s STATE spending for our share of the Medicaid program has increased more than any other state in the nation from 2000 to 2014. In 2000, 10.5% of Louisiana’s state revenue was spent on the state share of Medicaid. That figure is up to 18.9% of Louisiana’s state revenue in 2014. That 8-point increase is the largest in the country. Once the state’s share of expansion kicks in, you can bet that growth rate will only go up.
Meanwhile, as programs grow and costs soar, outside the Capitol, Louisiana has lost 25,000 jobs since state employment peaked in late 2014 – most of these in the past 18 months. It’s time for us to re-evaluate and revamp everything about the 90-year-old design of our current government. New tax increases with a catchy new name to fund the same archaic programs won’t change our fate.
It’s time to face the fact that the 90-year-old model for Louisiana government designed by Huey Long and enshrined in the Constitution under Edwin Edwards is fatally flawed. This model depends on an all-powerful state government that taxes, spends, and plays a prominent role in our lives and businesses – but frankly, continues to fail to deliver the outcomes our people need and deserve. This outsized role might be acceptable if it led to good roads, an educated and skilled workforce and a safe community – but it hasn’t. This top-down approach has failed in those respects time and time again, while also failing to incentivize individual responsibility and achievement, support upward mobility of families or spur economic growth.
Hopefully, this realization will trigger a sense of urgency. Perhaps this will spark not only thoughtful but innovative debates that will serve as a catalyst to reverse this 90-year trend. Big change is essential to alter our historic big-government approach. Confronting these ghosts won’t be easy or simple, but the days of running from this moment are soon coming to an end. Will this finally be the year? I guess we soon shall see.