Business groups to keep pushing for sales tax simplification

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Business groups plan to keep pushing for changes that would simplify how Louisiana collects sales taxes, after voters rejected a constitutional amendment calling for a more streamlined system. 

Dawn McVea, who directs the state chapter of the National Federation of Independent Business, argues that Amendment 1 would have helped small businesses compete with big-box retailers. 

“The only way to capture all the revenue due to the state and local governments via online sales tax collection and thereby potentially reduce our highest-in-the-country sales tax rate is to move to a centralized tax collection,” she says. 

Business advocates say Louisiana’s highly decentralized system for collecting sales taxes is too complex for companies that make sales in multiple jurisdictions and may not be compliant with the U.S. Supreme Court’s Wayfair decision. But local officials have long argued that their ability to collect their own sales taxes, as opposed to using a centralized collector like most other states, helps to ensure the money is spent the way local voters and taxpayers want it spent. 

New Orleans Mayor LaToya Cantrell, who cruised to an easy reelection Saturday, came out against the proposal. 

While a constitutional adjustment will eventually be required, regulatory, procedural or statutory reforms to improve the tax collection process can happen through myriad ways, says Stephen Waguespack, president and CEO of the Louisiana Association of Business and Industry.

“The fact remains that small businesses are desperate for a solution to the costly and regulatory burdensome current tax collection system imposed by local collectors,” he says. “The current system is making us uncompetitive as a state and is especially harmful to Main Street businesses all across Louisiana.”

Business groups celebrated passage of Amendment 2, which caps the top personal income tax rate at 4.75%, compared to the current 6%. The five corporate tax brackets will be collapsed into three, with the top rate reduced from 8% to 7.5% for income over $150,000. The change also includes triggers for further tax cuts if the economy performs better than expected. 

While most taxpayers are expected to save a little, the exchange is perhaps better understood as simplification rather than reduction. The state’s “sticker price” will more accurately reflect the actual tax burden, which advocates hope will make Louisiana more attractive to businesses and potential residents. 

In exchange, taxpayers give up constitutional protection for the state’s tax break for federal income taxes paid. Critics of the swap say it fails to fix the regressive nature of Louisiana’s overall tax system and does not allow the state to increase spending for education and other priorities.  

“While there is much more work to be done, Louisiana is now finally on the path to a more competitive income tax code to rival Southern competitors like Texas, Tennessee and Florida,” Waguespack says.

Amendment 1 failed by a margin of 48% to 52%, while Amendment 2 passed 54%-46%, according to complete but unofficial results the secretary of state’s office reported. Turnout was less than 14%.