A new tax and budget debate may be starting in the Louisiana Legislature, but the dividing lines remain the same.
Gov. John Bel Edwards unveiled a tax overhaul package that targets big companies and seems certain to put him at odds with the business lobbying organizations he’s battled during prior tax and other debates.
As part of the plan, the Democratic governor aims to raise more money for state government expenses, a position that is amplifying his strained relationship with many Republican lawmakers, particularly GOP House leaders.
While Edwards is talking about needing more dollars to pay for the TOPS college tuition program, road work, child protective services and K-12 education, Republican lawmakers are talking about needing to pare back spending.
The disconnects couldn’t seem wider ahead of the legislative session that begins next week.
That raises questions about whether Edwards and lawmakers will bridge the gaps, find a way to stabilize state finances and end nearly a decade of budget chaos - or whether the session will bring continued gridlock and little change.
Optimism seems in short supply.
“I have never seen Louisiana in the partisan situation that it faces right now. We have devolved into a mini-Washington unfortunately,” Commissioner of Administration Jay Dardenne, a Republican who works as Edwards’ chief budget architect, said Thursday.
Edwards is pushing tax changes he says would lower the tax bills of 90 percent of personal income taxpayers by shifting more tax burden to business.
To help replace $1.3 billion in temporary, mainly sales taxes set to expire in mid-2018 while also raising more money, Edwards wants to levy a new tax on gross receipts. It’s estimated to raise up to $900 million annually from businesses.
The 0.35 percent tax on sales would be charged on businesses with more than $1.5 million in gross receipts annually, which the Edwards administration estimates is 6 percent of Louisiana’s companies. Other businesses would be assessed a flat tax from $250 to $750.
Edwards says of 149,000 corporate income tax filers in Louisiana, more than 129,000 didn’t pay state income taxes in 2015.
“What this approach is designed to do is make sure that those entities pay something, their fair share. Otherwise, it is inevitable that the individual taxpayer, middle class and below, are paying more than their fair share — and in many cases, paying more than some of the largest, most profitable businesses in the state,” he said.
Critics say the tax harms companies working on tight margins by not accounting for profit or expenses. They say it can have a pyramiding effect, applying to every transaction in a production chain.
“Business is paying more than its fair share of taxes today. To allege otherwise is absolutely false,” Jim Patterson, tax council director for the Louisiana Association of Business and Industry, said in a statement.
He said businesses pay the majority of property taxes, individual and corporate income taxes, half of all sales taxes in Louisiana and other taxes.
Louisiana Chemical Association President Greg Bowser and Louisiana Mid-Continent Oil and Gas Association President Chris John issued a joint statement expressing concern.
“Louisiana is currently in a recession, and we now have the third-highest unemployment rate in the country. History suggests that increasing taxes during a recession often leads to greater unemployment and job losses,” they said.
Meanwhile, many Republican lawmakers resist the idea of changing Louisiana’s tax structure to bring in more dollars for government. Several House Appropriations Committee members said they’re interested in steeper cuts to the $29 billion operating budget proposal for the upcoming fiscal year.
Rep. Blake Miguez, R-Erath, said he can’t support tax hikes when workers in his district are struggling with the oil and gas industry decline and job losses. State government must do like households and “live within your means,” Miguez said repeatedly.
Other committee members, including Chairman Cameron Henry, R-Metairie, support spending only 98 percent of Louisiana’s income forecast, to hedge against overly optimistic estimates that could cause midyear cuts.
As lawmakers talked about deeper spending reductions, however, they spoke in generalities, not offering specific cut ideas, a point noted by the governor’s office.
The legislative session may only last two months, but those months are shaping up to be contentious.