With the state’s chemical industry in the midst of a period of growth, expansion and prosperity, does it make sense to change the tax structure, as Gov. Bobby Jindal is proposing? It’s a question industry is weighing closely, as it decides whether to support or oppose the governor’s recently released plan, which would do away with corporate and personal income taxes but increase state sales taxes.
“We’re looking at it and running a bunch of models to see how it will affect industry and different segments of industry,” says Dan Borne, president of the Louisiana Chemical Association.
Borne’s remarks came after economist Loren Scott delivered an upbeat economic analysis of the state’s chemical industry to the Baton Rouge Press Club. Scott’s report, which was funded by an industry-sponsored foundation, contains few surprises, but ultiamtely underscores the vitality of Louisiana’s chemical industry.
For example, in 2010 the industry accounted for $22 billion in earnings, $641 million in state taxes and fees and $534 million in local taxes and fees. What’s more, it is the state’s third-largest exporter and is in the midst of a $54 billion expansion that is expected to continue.
“These numbers are not unexpected,” Scott says. “But they are bigger than anything we’ve seen before.”
Scott says that’s why the industry is undecided on how the proposed changes, if enacted, would affect them.
“Whether it’s a good thing depends on whether you think it will do what they say it will do, which is bring more industry to the state,” he says. “Different industries are going to look at this and put pencil to paper and say, ‘hmmm.’ The chemical industry, for instance, is still looking at net operating losses it had in 2008, ’09 and ’10. Well, if you don’t have income tax, what do you apply those operating losses against?”
Jindal’s plan calls for the elimination of personal and corporate income taxes, but also a higher state sales tax rate and an expansion of the types of services for which it applies, among other changes. Jindal says it will lead to more jobs, a more business-friendly climate and will ultimately result in a net reduction in state tax burden for most residents. Critics say it will negatively affect low- and middle-class residents.
