Business groups are dismayed by Gov. John Bel Edwards’ proposals to help solve the state’s fiscal crisis, which includes a $750 million revenue shortfall for the current fiscal year and an estimated $1.9 billion shortfall for FY 2017.
Late Tuesday, the Edwards administration released a list of potential tax increases that could be used to solve the current year’s shortfall and the longer term problem. Among the most troublesome suggestions on the table from the perspective of the business community: a one-cent sales tax increase, a telecommunications tax increase, a repeal of the utilities sales tax exemption, suspending the inventory tax credit this year and capping it at a lower rate beginning next year, and suspending the deduction companies can take on their corporate income tax when they have a net operating loss.
“I was very disappointed and surprised to see the entire menu of options included revenue raising measures,” says Louisiana Association of Business and Industry President Stephen Waguespack. “This is not a menu. It is one main dish and it’s all taxes.”
Given all the discussions in recent weeks about the need for a balanced approach to tackling the state’s budget crisis and permanent fiscal reform, Waguespack says he and his members are surprised the administration didn’t propose any specific cuts.
“A lot of members are facing a tough 2016 and it’s a very dangerous time to go to the people with $2 billion in new taxes as compared to a complete mix of spending reductions,” he says.
The small business sector is also troubled by what they’ve seen from the administration so far. The penny sales tax increase, which would increase state sales taxes 25% from 4 cents to 5 cents, will hit small business owners particularly hard, says Dawn Starns, president of the Louisiana chapter of the National Federation of Independent Businesses. So would a utilities tax increase and the repeal of the inventory tax credit.
“Except for the tobacco tax increase and the internet sales tax, we have a problem with just about everything on this list,” Starns says. “At what point are we going to see cuts on the spending side?”
Starns says her group will immediately start surveying its members and contacting state lawmakers, “who will start to feel the heat.” With a three-week special session just three weeks away and no committee chairmen or committee assignments nailed down yet, she predicts a brutal and ugly special session.
“They’ve held no hearings, we have no Ways and Means chairman in the House and I think a lot of legislators are going to be under the gun to do something, knowing they have to pass it in three weeks,” she says. “Plus you have so many new lawmakers trying to digest this. It’s going to be difficult for everyone.”
—Stephanie Riegel
