While legislators, business leaders and local government leaders collectively brace for the debate on how to plug the $1.6 billion shortfall for the coming fiscal year, economists Jim Richardson of LSU and Steven Sheffrin and James Alm of Tulane University have developed potential solutions to the state’s tax structure. Their findings, however, are devoid of a quick fix for policy makers in the upcoming legislative session beginning April 13.
Speaking at a private briefing this morning hosted by the Baton Rouge Area Chamber, Richardson reviewed a taxation and incentives report prepared specifically for the Louisiana Legislature which was presented to a joint meeting of the House Ways and Means Committee and Senate Revenue and Fiscal Affairs Committee on March 10.
The economists’ proposed tax structure changes include lowering the personal and corporate income tax rates by doing away with some tax exemptions, as well as immediately reducing and eventually phasing out taxes on business inventory.
The economists also suggested reforming the state’s film tax credit program, which is untouched in the governor’s proposed executive budget for fiscal year 2015-16. They recommended putting a cap on the amount the Legislature is willing to commit to the tax credit and converting it to an annual appropriation, arguing the credit should be treated as an expenditure line item.
As for the governor’s budget proposal to change a number to tax credits from refundable to nonrefundable in order to save the state some cash, Richardson says, “We think the governor’s idea is not really very good tax policy. We are saying there are different ways to do it.”
In response to the economists’ analysis, BRAC President and CEO Adam Knapp stressed the importance of finding a balanced solution to reform the tax structure while avoiding the short-term issue of plugging the budget hole by putting the burden on the business community’s back.
“They’ve made some useful recommendations that would make Louisiana more tax competitive,” Knapp says. “They’ve also made some recommendations that would be significantly onerous to business.”
Michael DiResto, senior vice president of economic competitiveness for BRAC, says it is going to be difficult for policy makers to take a cautionary approach in a high stakes fiscal session.
“I think the concern that not only businesses have but every citizen is the admonition right at the end of the presentation of, ‘While seeking short term solutions, seek cautiously and do no harm to the state’s long-term competitiveness,’” DiResto says. “I think with the legislative session starting very soon with a $1.6 billion shortfall, it is going to be difficult to take that cautionary approach, but it is essential.”
Access highlights from the economists’ study, as well as a complete version of their presentation.
—Gabrielle Braud
