The Webster Parish Police Jury passed a resolution Tuesday in opposition of the state attempting to repeal the inventory tax package.
The Public Affairs Research Council gave some background on the tax in its state budget research brief.
“Local governments in Louisiana and across the nation collect ad valorem property taxes from residential and business property owners,” according to the brief. “Although unmentioned in the state Constitution, ‘inventory’ is included in property assessment values in Louisiana. Local governments collect a tax on inventories according to the local property tax millage.”
In the 1990s, Louisiana began returning the inventory tax paid in throughout the year to manufacturers, distributors and retailers for 100 percent of the inventory taxes they pay.
The way it works is this. A manufacturer, distributor or retailer pays an inventory tax, just like they do ad valorem taxes. They pay the tax collector, i.e., the Webster Parish Sheriff’s Office, and then that amount collected is turned around and disbursed among the various governmental entities such as the police jury, the school board and municipalities.
Then the state, during tax season, issues a rebate or tax credit to the company for the full amount they paid in throughout the year on their inventory.
The Louisiana Legislature attempted to pass a bill to repeal that tax package, which would have in essence cut funding to Webster’s governmental entities, but would have cushioned the state’s budget, state Rep. Gene Reynolds, D-Minden, said.
“It’s a shell game, and it’s a pretty good chunk of money,” he said. “It’s been targeted as one of the areas that probably will be repealed. Most states don’t have it. There is an effort to make some sort of offer where the locals can actually raise the money. There’s a lot of negotiations right now about how they’re going to at least replace part of the money.”
“Refunding the inventory tax was seen as a major step to make Louisiana more competitive when it was enacted, and it is still a factor in national rankings of business-friendly states,” according to the Louisiana Association of Business and Industry. “…in sum, should the state choose to repeal or reduce the state tax credit to industry but leave the local inventory tax in place, the net result will be an increase in taxes from Louisiana employers to state/local government of $377 million.”
According to figures provided by the Webster Parish Tax Assessor’s Office, had the repeal gone through, local governmental entities could have lost roughly $2 million. In 2014, Webster Parish brought in approximately $23 million in inventory taxes.
Tax Assessor Morris Guin says that would have been a “real big shortfall for the parish.”
“I think things will be a little different next year,” he says of Senate Bill 85 and similar bills with it. “It scared me when all that first started coming up this year, because that was going to be a terrible short cut for us.”
Reynolds says if the state is going to repeal it, they need to offer a solution to replace that funding so that it doesn’t cripple “the locals.” That’s what they will be looking at in January during the special session, he said. Then the following session will be a fiscal one, and legislators will be able start discussing options.
“It needs to be an offset on there or a slow transition to that so it’s not such a shock to the system,” he said.