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Governor’s business tax reform idea inspires questions across political spectrum


March 27, 2017
By Kevin Frey
Originally Posted on KPLC

BATON ROUGE, LA (WAFB) -

A tax proposal released by the Edwards administration ahead of this year’s session has people across the political spectrum scratching their heads.

The plan calls for changes to how businesses are taxed, creating a so-called “gross receipts” tax. Right now, businesses in Louisiana are taxed based on their profit – how much they take in any given year, once expenses such as payroll and purchases are deducted. Under the governor’s proposal, businesses would be taxed based on how much money they bring in overall, before the expense deductions.

For months, a panel of state leaders worked to put together a list of ideas for tax reform. This proposal from the governor was not one of them.

“It wasn't an approach that any of us favored, and it really caught everybody by surprise,” said Barry Erwin, a member of the task force and the president of the Cable for a Better Louisiana.

The specifics of the plan have not yet been introduced. The governor was supposed to introduce his policy proposals Monday, but that was put off until Wednesday, March 29.

In the business community, some worry it could amount to a tax hike, especially for businesses that already have small margins of income, such as grocery stores.

“The problem is if you are, for example, a startup business and you have a lot of front-end expenses, you won't get the benefit of deducting those,” said Jason DeCuir, with Ryan Advocacy and the Louisiana Association of Business and Industry.

Jan Moller with the Louisiana Budget Project said the plan could have wider consequences, especially if stores decide to raise their prices to protect their bottom lines.

“It is a form of a sales tax, a kind of hidden sales tax, and sales taxes in general tend to effect poorer people harder than rich people,” Moller said.

Whether they choose to go with this plan or something else, lawmakers must do something this session if they want to avoid deep cuts to state programs going forward. In 2018, many of the measures put in place to deal with last year’s budget shortfall will disappear, leaving the state with a new deficit of more than a billion dollars.

The question remains, however, whether there is enough political will-power to make changes to tax policy to avoid the fiscal cliff.

“Do we just kick the thing again and just renew this penny of sales tax, which everyone admits is a bad idea, or do we actually fix it? I just don't know that we know the answer to that,” Erwin said.

The session kicks off on Monday, April 10.