In recent years, Louisiana has repeatedly faced significant budget shortfalls, with the holes being patched by temporary fixes. The Legislature entered the 2017 Regular Session facing a $440 million shortfall for the 2017-18 budget year and an additional $1.3 billion deficit looming in July 2018, when certain temporary taxes, such as an extra penny of sales tax, are set to expire.
To address the state’s structural budget imbalance and the looming fiscal cliff, the Legislature took up recommendations by a blue-ribbon panel created through House Concurrent Resolution (HCR) 11 of 2016’s First Special Session. Taken holistically, the HCR 11 Task Force’s recommendations offered a balanced approach to evolving a tax system that’s more predictable, easier to comply with, and would improve our economic competitiveness with other states.
Unfortunately, most of the HCR 11 Task Force recommendations failed to gain traction.
Two sets of bills that advanced further than most were authored by Rep. Julie Stokes and Rep. Barry Ivey. They proposed two Constitutional Amendments, HB353 (Stokes) and HB356 (Ivey), which would have replaced the graduated personal income and corporate income tax rates with a flat rate, in exchange for eliminating the deduction for federal income taxes paid. These bills were ultimately pulled from consideration after a hearing by the Senate Revenue & Fiscal Affairs Committee.
The spirit of these measures reflects the principle of broadening the tax base while lowering tax rates. 1A supports this principle, which would provide for a simpler, more competitive tax code.
Another key principle in 1A’s advocacy on fiscal reform is to do no harm to Louisiana’s economic competitiveness. To that end, 1A strongly opposed tax measures that unfairly targeted the business community.
One of these anti-business bills was HB628 (Jones), which proposed imposing the Commercial Activities Tax (CAT), a tax on the gross receipts or revenue of businesses with receipts above a certain threshold. Thanks to strong testimony by the business community about the negative impact this complex business tax would have on jobs and the economy, the bill was defeated very early on in the session in the House Ways & Means Committee, where tax measures must originate.
Another tax proposal that unfairly targeted the business community, which 1A opposed, was HB648 (Havard). HB648 provided for revamping Louisiana’s corporate tax structure and levying the “Louisiana Corporate Flat Tax,” a tax on business activity. Like the CAT, the Louisiana Corporate Flat Tax would have applied to a business even when it is not profitable. HB648 was also defeated in the House Ways & Means Committee.
1A will remain engaged as the Legislature enters a Special Session to solve the FY 17-18 budget.