A limited but significant revamp of Louisiana’s corporate tax code passed the first of many steps before it can become law on Wednesday.
But broader efforts to reduce or eliminate dozens of corporate tax breaks faced a blizzard of opposition from special-interest lobbyists.
The action took place before the House Ways and Means Committee, which under its chairman, state Rep. Stuart Bishop, R-Lafayette, is trying to pare back credits and deductions that legislators and governors have added to the tax code for years with the stated purpose of encouraging business investment.
Bishop and other House and Senate leaders want to reduce the tax breaks in exchange for lowering a top corporate tax rate that is higher than in neighboring states. Bishop and others say the higher rates keep businesses from coming to Louisiana, even if the actual taxes paid here are low because of all the deductions and credits on the books.
But lobbyists turned in a stack of the red cards used to register their opposition to Bishop’s House Bill 444, which would take a big bite out of corporate tax breaks. Bishop joked that the sergeant-at-arms ran out of red cards for other bills.
Bishop announced the committee would hear his bill another day since the Legislative Fiscal Office hadn’t yet determined how much money it would bring in.
The Ways and Means Committee did approve two measures aimed at passing a tax swap that aims to reduce the top corporate tax rate in exchange for eliminating a popular corporate tax deduction.
The two measures, House Bills 292 and 293, both sponsored by state Rep. Neil Riser, R-Columbia, would assess corporations a flat 6% income tax rate while no longer permitting them to deduct their federal tax payments on their state income tax returns.
That tax swap would have a net cost to the state of about $20 million per year, according to the Legislative Fiscal Office.
Louisiana corporations are currently assessed at five rates, topping out at 8%. Those five rates would collapse to the 6% rate if the Legislature approves HB292 and 293 and then the public approves the changes to the constitution in an election to be held in November 2022. Ways and Means didn’t take up the third part of Riser’s package, House Bill 275.
Riser said the changes would simplify the corporate tax system and make Louisiana more attractive by moving to a lower top tax rate.
State Rep. Barry Ivey, R-Central, praised the proposed changes but advised his colleagues that potential investors care about more than simply the top corporate tax rate.
“We all know that the net tax liability for these corporations is relatively low,” said Ivey, who has repeatedly tried and failed to restructure Louisiana’s tax system in recent years. He said that companies also want an educated workforce, which requires tax revenue.
Bishop and state Sen. Bret Allain, R-Franklin, are also trying to eliminate the deduction for federal individual income taxes on state tax returns in exchange for reducing individual income tax rates. That effort began Tuesday.
While Bishop deferred his bill Wednesday, state Rep. Phillip DeVillier, R-Eunice, brought forth House Bill 454, which would cut all corporate tax breaks in half.
DeVillier said he knew his bill wouldn’t be popular among business lobbyists — he noted that many of them were sitting behind him in the audience — but said lawmakers had to act now because one source of state tax collections is likely to drop while the other is scheduled to disappear.
One reduction, he said, would arrive if Democrats in Congress and President Joe Biden’s administration succeed in raising corporate taxes. If they do, it will reduce Louisiana income tax receipts because of the federal tax deduction provision. Under the current setup, higher tax payments to the federal government mean bigger tax write-offs on Louisiana tax returns.
DeVillier also noted that a 0.45% state sales tax increase, approved by the Legislature during the third special session of 2018, expires in mid-2025. It produces about $500 million per year.
DeVillier said lawmakers should act now. If they don’t, he noted, they will have to wait two years to address tax issues next in a regular session. And because 2023 is an election year, he said lawmakers won’t want to do anything until 2025.
Lobbyists from the Louisiana Bankers Association and the American Property Casualty Insurance Association told committee members that a cut in the tax breaks would amount to double taxation for their members.
In the end, the committee heeded DeVillier’s request that they defeat an attempt to preserve one tax break and allowed him to present his bill another day, after the Legislative Fiscal Office determines how much it would generate for the state.
Committee members then adjourned to have lunch provided by two Entergy lobbyists in a side room.
Credit: Source link
