BATON ROUGE — Facing certain defeat, Gov. John Bel Edwards gave up Tuesday on his effort to levy a new tax on business sales to help stabilize Louisiana’s budget, a move that throws his budget-balancing tax plan into disarray.
Rep. Sam Jones, a Franklin Democrat who sponsored Edwards’ proposal, pulled the bill after two days of hearings in the House Ways and Means Committee because of insurmountable opposition from the conservative, majority-Republican committee.
“The votes were not there,” Jones said.
The administration doesn’t intend to revive the proposal to enact a tax on a company’s gross receipts amid strong opposition from lawmakers who say it would harm business growth in a state with one of the highest unemployment rates in the country.
With the centerpiece of Edwards’ tax package upended, attention shifts to House Republican leaders to devise a path forward for balancing next year’s budget and coping with the loss of $1.3 billion in temporary taxes set to expire in mid-2018.
“At this point in time I’m looking for the House leadership to step up, offer solutions and not just continue to say no,” Edwards said after his tax proposal was shelved.
House Speaker Taylor Barras, a Republican, said the Ways and Means Committee will start voting on other tax proposals next week. He accepted Edwards’ assessment the House needs to start formulating its own budget and tax plans.
“I don’t disagree with that. We have a good bit of work to do, and hopefully, we’ll see some traction,” Barras said.
An array of tax bills are pending in the House, where most tax measures must start. But GOP House leaders haven’t championed a package of ideas — or agreed on how much of the temporary taxes they’d like to replace.
Other Edwards-backed proposals, such as charging new sales taxes and lessening tax breaks, won’t generate enough money to fill the mid-2018 gap. The governor said he’ll consider other ideas, and he said enough time remains in the two-month legislative session, which wraps up in early June, to close the budget hole and end cycles of continued shortfalls.
“We have so many options available to us, but we’ve got to stop wasting time,” he said.
A gross receipts tax is a tax on business sales, without consideration of profit or expenses. Edwards said the proposed tax, which he called a Commercial Activity Tax, would have made companies that use loopholes pay “their fair share.” He cites data that 80 percent of corporate income tax filers in Louisiana didn’t pay state income taxes in 2015.
But the idea gained little public support, even from the Democratic governor’s allies.
Business owners and lobbying groups hammered the concept. They told lawmakers a gross receipts tax could damage expansion plans, force businesses to shrink staff and chase away economic development deals. They said such a tax would be passed along to customers, who would face boosted prices and charges. And they rejected the suggestion they don’t pay taxes.
“The governor says we don’t pay our fair share. Honestly? That’s an insult,” said Mitch Rotolo, owner of Rotolo’s Pizzeria, which has 31 restaurants in four states.
Rotolo has been eyeing opening a store in Alexandria. But he told lawmakers: “You keep putting a burden on me, I can’t go there.”
Chris John, president of the Louisiana Mid-Continent Oil and Gas Association, said the tax plan would harm an industry that already is struggling. He said the state has repeatedly changed its business tax laws in the last few years, giving companies little clarity or certainty about what they will pay each year.
“We can continue to harm the business environment, but my problem is I just don’t even see that it’s going to fix” the budget problems, said Rep. Julie Stokes, a Kenner Republican.
The barrage of opposition came even after the Edwards administration tweaked the proposal, to strip most small businesses out of the bill. After the latest changes, a bill that once was estimated to bring in up to $900 million a year from new business taxes was projected to instead raise $288 million.