A key component of Governor John Bel Edwards’ tax reform plan would impact businesses throughout the state.
The proposed Commercial Activity Tax would levy a gross receipts tax on businesses with $1.5 million a year in sales or more, and it’s similar to a sales tax but paid by the seller instead of the buyer.
Edwards says a vast majority of Louisiana businesses paid no taxes to the state in the 2015 tax year.
“The central piece of this plan involves levelling the playing field that has been unfairly tilted toward the big guys, but doesn’t cause unnecessary harm. It simply asks more businesses to do their part,” Edwards said.
President of the Louisiana Association of Business and Industry, Stephen Waguespack says this is a harmful tax if you’re trying to create jobs and grow your economy. He says this tax will target small and midsize companies that are the backbone of the economy in local communities.
He says the CAT could push these businesses out of the state.
“Companies are going to go to where they can grow and invest and expand and not be punished for it. Quite frankly, Louisiana is becoming more and more uncompetitive with other states,” Waguespack said.
Edwards says the CAT would exempt businesses making less than $1.5 million a year. He says small businesses would instead pay the minimum fixed rate of $250 to $750. He doesn’t believe higher taxes will discourage businesses in the Bayou State, because they want a stable and predictable tax structure.
“They have been deciding to expand or set up operations in states where the tax burden is higher than it is here in Louisiana because they know that it’s stable,” Edwards said.
Waguespack says many corporate tax incentives and deductions have already been reduced in recent years, making it more expensive for companies to do business in Louisiana. He says businesses are struggling to keep up with that cost, and it’s causing job loss in the state.
“We’re over 25,000 jobs down over the last two years, and the last thing we need to do is put new taxes in place that are going to make it even worse, and unfortunately that’s what this new tax will do,” Waguespack said.