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Edwards unveils tax plan for upcoming session

Gov. John Bel Edwards explains the tax structure rewrite he's proposing for the upcoming legislative session, on Wednesday in Baton Rouge.

BATON ROUGE — Gov. John Bel Edwards released his proposal Wednesday to rewrite Louisiana’s tax laws, pushing significant changes that would shift more of the state tax burden to businesses, lessen sales taxes and raise hundreds of millions for next year’s budget.

The tax package — released fewer than two weeks before the legislative session opens April 10 — would replace $1.3 million in temporary taxes set to expire in mid-2018, while also raising another $400 million for next year’s budget, according to the Democratic governor.

Edwards said the effort is aimed at stabilizing state finances and ending continued cycles of budget deficits that have kept lawmakers and governors scrambling for nearly a decade to patch together money to pay for government programs and services.

The tax changes also would drum up new money that Edwards wants to spend on the TOPS college tuition program, K-12 education and other items.
“This is a fiscally responsible approach to bring our system into the 21st Century,” he said.

The centerpiece of the package is a new tax on gross receipts, called a Commercial Activity Tax, estimated to raise up to $900 million a year from businesses.

Businesses making more than $1.5 million annually would pay the tax, which is a tax on sales without looking at expenses or profit margins. Those companies making less than $1.5 million annually — about 94 percent of those in Louisiana, according to the revenue department — would be assessed a flat tax ranging from $250 to $750.

The proposal attempts to get at businesses that use existing tax laws to avoid paying state taxes. Edwards says of 149,000 corporate tax filers in the state, revenue department data shows that more than 129,000 didn’t pay taxes in 2015.

Edwards said he’s trying to make sure businesses pay “their fair share,” so that the funding of government services doesn’t rest disproportionately on individual taxpayers, like middle-class households.

The idea was not among the recommendations backed by a legislatively-created tax reform task force. Lawmakers, business groups and lobbyists were caught off-guard by the gross receipts tax proposal, which Edwards started floating two weeks ago.

The governor also is proposing to phase out the corporate franchise tax over 10 years.

On sales taxes, he wants to let a temporary, 1-cent sales tax increase expire as planned in mid-2018. But he wants to extend the state sales tax to the purchase of some services, like cable and satellite television, security services and landscaping.

For personal income tax, Edwards proposes to do away with a tax break that allows people to deduct the federal income taxes they pay from their state tax liability, swapped out for lower overall tax rates. The governor said that would lower taxes paid by 90 percent of taxpayers.

The governor also wants to rework the myriad of state tax breaks.

Most of the attention has centered on the gross receipts tax, because it’s unfamiliar in Louisiana. A handful of states have some variation on the tax.

Critics say businesses pass the taxes along to consumers, disproportionately hitting the poor, just like a sales tax, but with less transparency. They say the tax harms companies struggling to stay afloat or startup businesses by not accounting for profit margin and can have a pyramiding effect by applying to every transaction in a production chain.

“This is the wrong approach for states,” the right-leaning, Washington-based Tax Foundation wrote in an analysis this week that said gross receipts taxes “have a negative impact on the economy.”