Candidates get behind franchise tax repeal

Legislation to phase out Louisiana’s corporate franchise tax this year was met with a veto from Democratic Gov. John Bel Edwards. Still, nearly all candidates running to replace him have vowed to support the move.

Senate Bill 1, sponsored by Franklin Republican Sen. Bret Allain, aimed to phase out what he described as “the worst tax Louisiana has on the books” because it disincentives business investment, cutting the tax by 25% for every year corporate income tax revenues remain above $600 million.

The measure cleared both chambers of the Legislature by wide margins, but Edwards vetoed SB 1 in June, arguing it’s an “unwise” move “at this time” due to the unknown impact of previous tax changes. Edwards’ veto came despite overwhelming legislative support, where only one lawmaker voted against it.

Most candidates running to replace the term-limited governor have signaled support for a similar bill next session, which economists at the Pelican Institute and Tax Foundation contend would help boost the state’s economic competitiveness and promote job growth.

State Sen. Sharon Hewitt, R-Slidell, voted for SB 1 and SB 6 to reduce tax credits during the phaseout to “eliminate our corporate franchise tax in a prudent, economy-driven way,” she said in an email to The Center Square.

Hewitt noted current law deposits revenues from corporate income and franchise taxes over $600 million into savings funds that have reached $2 billion, “restricting the Legislature’s opportunity to fund important priorities, such as early education, roads and bridges, and higher education.”

“Should the Legislature pass a similar bill next year to get rid of this anti-business tax, I will proudly sign this bill as governor, sending a message to the world Louisiana is open for business!” Hewitt said.

Stephen Waguespack, former head of the Louisiana Association of Business and Industry, contends eliminating the franchise tax should be part of a broader effort to lower and simplify taxes in Louisiana.

“Unfortunately, Louisiana has been doing the opposite, and Gov. Edwards’ veto makes it harder for businesses — big and small — to operate in our state,” he said.
Attorney General Jeff Landry agreed “we need to take a look at the larger picture and see what is working and what is not working in Louisiana’s tax system.

“This includes taking a real look at our tax system as a whole, including the corporate franchise tax,” he said.

“We need to understand what is hurting the industries that built this state and create a tax structure that would revive our economy.”

A spokesman for Treasurer John Schroder said he agrees “Louisiana needs a simplified tax code and needs to create an environment that serves as a catalyst for growing businesses.”

Schroder, the spokesman said, “is looking forward to signing the legislation into law next year.”

Rep. Richard Nelson, R-Mandeville, led efforts to overhaul the state’s tax structure in the House this session with a series of bills to eliminate both the personal income and corporate franchise taxes and shift the burden to property and sales taxes over the next four years. Though the bills did not gain approval, they’re now central to his campaign for governor.

“I think we really have to look at the scope of the problems and find something that will fix it,” he testified in committee. “I think this would make some good progress in actually moving forward.”

Independent Lake Charles attorney Hunter Lundy also believes the franchise tax hinders the state’s ability to “generate wealth and income to pay for the programs we need.”

“While I understand the governor’s concern, our greater concern must be with education, infrastructure and job creation in this state,” he said. “By freeing businesses from unnecessary and complicated costs, we can begin to build real wealth in Louisiana.

“To that end, I am for repealing the corporate franchise tax as soon as possible,” Lundy said, adding he would support Allain’s plan, if elected.

Former Department of Transportation and Development Secretary Shawn Wilson, Edwards’ endorsed candidate and the only Democrat vying for his office, did not respond to a request for comment on his plans for the franchise tax.