The head of the Louisiana Association of Business and Industry said he has concerns with a new proposal Gov. John Bel Edwards is expected to roll out next week to reform the state’s tax system.
Stephen Waguespack, LABI president, told a group of officials at the Port of Lake Charles on Friday that Edwards’ proposed “gross receipts tax” could “leave the service-based entities” in Louisiana “out in the cold.” The governor is expected to give details of the concept on Monday and push it once the regular legislative session begins April 10.
The strategy is similar to Ohio’s corporate tax system, and it would replace the corporate franchise and corporate income tax. Waguespack said it may not work, considering Louisiana’s mainly service-based economy.
“That’s where our true wealth is ... and the big companies have come in and partnered with those folks,” he said. “Why would we want a tax system that encourages vertical integration that pushes away those contracts and partnerships? That’s what we’re worried about.”
Waguespack said the state’s 90-year-old model in collecting and dispersing money is “broken.” He said fiscal reform is the “800-pound gorilla in the room.”
Waguespack said state lawmakers need to work on fixing the economy, along with overhauling the tax code and budget. He said spending on Medicaid and retirement also needs to be reviewed.
“We’re spending heavy but not getting the results,” he said. “You see that throughout our budget, which is frustrating.”
Waguespack said tax increases put burdens on struggling employers, which leads to an economic recession and lower tax collections. Meanwhile, state taxes continue to grow annually, with Louisiana spending $5,599 per person annually.
Waguespack said people should also pay attention to reforming criminal justice in the state. He said the current system is “very expensive” and has led Louisiana to incarcerating more people per capita in the country.
“It isn’t really driving people to the public safety we all want,” Waguespack said.
Instead of jailing low-level, nonviolent offenders, Waguespack said, the offenders could be assigned to a drug court or job training programs.
Waguespack said he is worried about the state becoming more aggressive in state-sponsored lawsuits against the oil and gas industry over the past year. He said LABI will oppose legislation that would open up contingency fees to make those lawsuits easier.
Waguespack said the most distrust people have with government revolves around how it spends money on infrastructure. He said LABI is asking Edwards to come out with a plan detailing what he wants to raise and which projects the investments would pay for.
Waguespack said the economic growth in Lake Charles is “literally the lifeboat that the whole state is swimming towards right now.”
“It really is keeping everything afloat,” he said. “You’re doing your part.”
Waguespack said he isn’t convinced the state is ready to hold a constitutional convention with the mindset needed to bring big changes.
Rep. Mike Danahay, D-Sulphur, said he agreed with Waguespack’s comments on the state’s process in collecting and dispersing its money being outdated.
“He brought some interesting statistics to the table,” he said.
Danahay said the idea of a constitutional convention is being discussed but would take a “groundswell” to become a reality.
“I think it needs to be done and under the right circumstances,” he said.