The business lobby notched a small win on the final day of the legislative session last week when a handful of bills targeting Louisiana companies and the taxes they pay were given a three-year expiration dates. But it only slightly sweetened what was otherwise an an unsavory end to a painful two months.
From the day the session convened, on April 13, to the day it adjourned, last Thursday, June 11, business and industry seemed more like it was on the table than at the table.
After several years of mid-year budget cuts, redirecting money from state reserve funds and privatization efforts, lawmakers felt they are left with few other choices than to go after business to fully fund health care and higher education.
As a result, many in the business community feel like they have no other choice than to begin looking more seriously at the fall ballot, with an eye to electing a friendlier Legislature — and in some cases maybe serve up retribution.
The big threat, however, is that incumbent lawmakers will not only have to face additional scrutiny from the usual business groups with political action committees, but all of the business-related players with vested interests at the Capitol.
Businesses are positioned to receive a cut of 25 percent in the state tax credit they receive for the amount of local inventory taxes they pay, a suspension of a 1 percent exemption on utilities, limited exemptions on horizontally drilled wells, smaller corporate income tax exclusions, a 20 percent reduction in certain tax rebates and an elimination of the carry-back option for net operating loss deductions for corporate income tax.
The problem heading into the session, according to several lawmakers and the Jindal Administration, was that the state over the past seven years had chosen to give away more tax credits, incentives and rebates than there were revenues coming in to sustain the government.
House Speaker Chuck Kleckley, R-Lake Charles, said a careful review should have been carried out on the tax giveaways this session but lawmakers ran out of time.
“We’ve seen some numbers that it’s a $2 billion annual cost to the general fund. Now take that and plug it into the shortfall we had,” Kleckley said of the $1.6 billion shortfall. “I’m not debating whether they’re bad or good, but I’m saying that it’s an area we need to work on.”
The governor, who supported the tax giveaways in the past, agreed.
“The state has also been funding large spending expenditures to corporations through corporate welfare – free from the taxpayer – and that contributes to the shortfall,” said Shannon Bates Dirmann, the governor’s spokesperson.
Business and industry has been the biggest beneficiary of these substantial tax breaks in recent years, but the tide turned sharply this session. Looming possibly larger than the conflicts between the Legislature and the Jindal Administration was the ever-present funding choice lawmakers repeatedly had to make: higher education or business.
Clearly, higher education won that battle and now business interests are wondering just how hard they’ll go charging into the fall elections. Some lawmakers are meeting the threat with equal parts trepidation and disbelief, noting they’ve passed one tax break after another in recent years to help business.
“This session will forever change how we do credits and rebates here,” said House Appropriations Chairman Jim Fannin, R-Jonesboro. “We try to help business and they have chosen to take that as meaning forever and then calling it a tax increase.”
That they are. The Louisiana Association of Business and Industry estimates that companies large and small will have to pay billions in new taxes over the next three years.
LABI president Stephen Waguespack said in regard to the fall elections that his group will soon “re-evaluate, re-focus and start meeting with our (political action committees).”
“Ninety percent of the tax increases passed this session have been on business,” Waguespack added.
LABI is already in discussions to scrap its PAC rules that guarantee an endorsement if lawmakers vote with the organization 75 percent of the time. That would allow the PAC committees to consider every race individually, regardless of legislative votes.
Dawn R. Starns, state director of the National Federation of Independent Business, said her group is sticking with its 70 percent two-year voting threshold.
“But with the votes they’ve taken this session several will likely take some hits in our scoring,” she added.
Like LABI and NFIB, the Louisiana Mid-Continent Oil and Gas Association was expected to be heavily engaged in elections this year. But LMOGA will spend more this fall than ever before — a strategy that was formulated prior to the session being convened.
“We will look at the races in the fall and dig deeper for support of oil and gas,” said LMOGA president Chris John. “We’ll have a clear menu of bills to review from this session for sure.”
The Louisiana Oil and Gas Association is in the same boat, as is the Louisiana Chemical Association. The Louisiana Manufacturers Political Action Committee, which LCA is closely aligned with, ran running radio ads statewide asking voters to urge lawmakers to kill legislation that would suspend exemptions on business utilities.
It didn’t halt the legislation and lawmakers say they felt the pressure from LCA most acutely during the session. Should LCA lead a charge this fall, other business organizations on the fringes of this session’s debate might be encouraged to follow suit.
Couple this with any reaction the Louisiana Republican Party might have to GOP lawmakers supporting taxes, and the lumps incumbents will surely take from their announced competitors, and the 2015 election cycle could quickly turn into a bruiser.
For more Louisiana political news, visit www.LaPolitics.com or follow Jeremy Alford on Twitter @LaPoliticsNow.