When Gov. John Bel Edwards unveiled the centerpiece of his tax plan for the legislative session—a gross receipts tax called a commercial activity tax, or CAT—he told those in attendance at the March 29 press briefing that he’d come up with the idea after traveling the state and talking to lawmakers.
“The CAT came into play when you look at what you can do that provides for better policy but that also you can pass,” he said. “It became very clear to me in conversations that I had with legislators what they are willing to embrace and … the result of those conversations led us to where we are today.”
But as Business Report details in the cover story in the new issue, the CAT was virtually DOA by the time the session began just 12 days later. Not only had business groups—predictably—lined up against it, so had members of the governor’s own party.
The administration didn’t even file a CAT bill until the second week of the session, and Edwards has already made adjustments to scale back the proposed tax in an attempt to get business groups on board. The changes meant the tax would only raise about $400 million next year, and not the $800 million to $900 million originally projected. The bill, however, still died in a House committee on Tuesday.
It doesn’t bode well for the two-month session, which advocates of fiscal reform—including some of the state’s leading business and good government groups—had hoped would bring about real, meaningful changes to the state’s convoluted, antiquated and anticompetitive tax code.
Three weeks into the session, there are very real questions about what, if anything, might be accomplished this year. Perhaps more troubling, the other big issue Edwards’ tax plan sought to address—a projected $440 million shortfall in fiscal year 2018 and a looming “fiscal cliff” in FY 2019—is being called into question by many House Republicans, who accused the governor of having a spending problem, not a revenue one.
Though it’s too soon to predict what might happen between now and the end of the session on June 8, there seems to be a growing consensus that, at best, some minor changes to the tax code might be made in the name of fiscal reform, while lawmakers cobble together a budget for the next fiscal year and postpone for a later day any discussion about that fiscal cliff, which the state will supposedly fall off on July 1, 2018.
What that means for businesses in the long term isn’t good, whatever tax concessions they may wrangle from this session. As long as the state’s tax code is outmoded and its budgeting process continues to consist of midyear special sessions that result in deep cuts to education and health care, Louisiana’s competitive position relative to other states will continue to decline. That’s not good for anybody.
Read the full Business Report cover story, which provides a guide to the 2017 legislative session and snapshots of key proposals for budget and tax reform, a transportation tax and criminal justice reform. Send your comments to editors@businessreport.com.
