There’s a growing interest at the State Capitol in the idea of a “corporate existence tax”—or the idea that some businesses aren’t paying taxes when they all should simply because they exist, says the head of Louisiana’s Public Affairs Research Council.
Robert Travis Scott told the Rotary Club of Baton Rouge today that moving in the direction of such of a tax would be a mistake for Louisiana.
It would hurt startups and narrow-margin companies, he said. But an issue of fairness has developed at the Legislature.
“If they end up with something like a corporate minimum tax, which is what they are talking about, I think it would be a further, elaborate demonstration of how our taxes have really become dysfunctional,” he said.
Scott has co-authored numerous reports on the state’s budgeting, taxes and economic development practices. He currently serves as a member of the state’s Task Force on Structural Change in Budget and Tax Policy. The panel has been tapped to create a plan to address the state’s budget. It has until mid-September to do so.
Scott also serves on state Sen. R. L. Bret Allain’s task force on state and local taxation laws. But today, Scott stood before the Rotary Club to talk about Louisiana’s revenue and spending problems.
Legislators, Scott said, tend to be better at spending than cutting. Louisiana’s chronic imbalance in its finances has hurt its business climate, higher education and public services, he said.
“We have a crisis every year. We have a lack of predictability in our outlook,” Scott said. “For businesses, this lack of predictability about what the government is going to do has been harmful.”
Meanwhile, debt, pensions, group health care benefits and the state’s continued financial support of local governments continue to strain Louisiana’s budget.
And while other U.S. states seek to phase out the corporate franchise tax levied on a business’s capital assets and net worth rather than its income, Louisiana is the only state to expand its corporate franchise tax and collect more revenue.
States such as Mississippi are moving away from the tax to resolve long-term fiscal issues in an effort to encourage business investment and job creation.
While Scott said the Louisiana Legislature’s chose to expand the tax to help get the state more revenue during the first special session, he said some believed it was done out of fairness.
“The total liability, the total amount you can collect, is in the $300-400 million (range),” Scott said. “When you add all the credits in that companies can take for it, it ends up being a tax that nets the state about $60-160 million per year. Basically, we have a pretty nuisance, dysfunctional tax that really isn’t doing anybody any good.”
—Alexandria Burris
