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Louisiana businesses hit hard yet again in special session

March 10, 2016
By Stephanie Riegel
Originally Posted on Greater Baton Rouge Business Report

In the immediate aftermath of Louisiana’s special session, there were plenty of unanswered questions—namely, how much some of the tax bills passed in the final, chaotic moments before adjournment will actually generate for the current cash-strapped fiscal year and the next.

But a couple of things are fairly certain. First, no one is particularly happy with the outcome of the three-week session. Second, business, once again, took it on the chin.

Though it’s not clear by exactly how much businesses’ tax bills will go up, Louisiana Association of Business and Industry President Stephen Waguespack estimates that between the 2015 session and the recent special session, business taxes increased at least $2 billion.

“We’ve stepped up, and we understand we have to come to the table and be a good partner,” Waguespack says. “But we seem to be the only one at the table.”

Going into the session, LABI and other business groups were prepared for a fight over several controversial revenue-raising measures. They lost almost all of them.

Lawmakers repealed the business utilities tax exemption, which means for the remainder of the fiscal year, businesses will be taxed at 5 cents on the dollar. Beginning next year, they’ll be taxed at 2 cents.

Lawmakers also approved a sales and use tax on manufacturing, machinery and equipment—2 cents for the remainder of this fiscal year and 1 cent in the fiscal year that begins July 1. The outmoded tax, which is considered anti-competitive, was repealed during Gov. Kathleen Blanco’s administration.

“We finally got rid of the MME tax,” says Public Affairs Research Council President Robert Travis Scott. “Now it’s back.”

In another blow, lawmakers expanded the franchise tax to include C-corporations.  Previously, only S-corporations paid the tax, which has been repealed in all but 15 states around the U.S.

Then there’s the sales tax increase, which will impact business as much as anyone. According to Waguespack, business pays 47% of all sales taxes in the state.

One bright spot for business was its success in preserving the inventory tax credit. Efforts to reduce or repeal it were defeated, which was a big victory—particularly for auto dealers and mid-sized manufacturers.

What’s perhaps most troubling for business leaders is that, despite all the sacrifices, the state’s budget is still $30 million in the hole for the current fiscal year, and the size of next year’s deficit is still unclear. It’s a reminder that more pain lies ahead with no palatable solution in sight.

“I don’t think anyone walked out of that session feeling great,” Waguespack says. “No matter where you sit on the spectrum, you don’t feel good.”