A kindly written veto, but still a veto, fells Allain's franchise tax bill

At a St. Mary Chamber luncheon Wednesday, outgoing state Sen. Bret Allain looked back on his 12 years in the Legislature with pride, especially this year’s SB1, which would phase out Louisiana’s corporate franchise tax.

The franchise levy is the worst sort, Allain told the Chamber audience, because it taxes capital investment in the state. It would go away under SB1, which passed in the Legislature this year.

But about 1 p.m., while Allain was still at the head table at the Petroleum Club of Morgan City, the Governor’s Office emailed a press release. Gov. John Bel Edwards vetoed SB1 with a message that was more in sorrow than in anger.

“That’s the most complimentary veto message I think I ever read,” Allain said. “But it’s still a veto.”

Changes pushed by Allain and enacted in 2021 exempted the first $300,000 in capital from the franchise tax and lowered rates. It also established the possibility of further rate reductions if revenue goals, called triggers, were met.

SB1 would have phased out the tax completely, reducing it by 25% in each of four years, again based on revenue triggers.

The Edwards veto message praised Allain’s work on tax reform in 2021 and acknowledged that the franchise tax “is antiquated and should be structurally reformed or repealed.”

But the fiscal impact from the 2021 changes won’t be known until December or early next year, after a new automatic extension for filing 2022 taxes takes effect in November, the governor wrote.

“With many moving and intertwined pieces, it is unwise to create a second franchise tax reduction trigger at this time,” Edwards wrote.

The Legislature would also have to deal with the impact of portable tax credits on corporate income tax revenue, plus the coming end of a 0.45% sales tax, the return of suspended sales tax exemptions and the dedication of some taxes to transportation and revenue stabilization tax funds.

But “I applaud [Revenue and Fiscal Affairs Committee] Chairman Allan’s efforts in 2021 and this past legislative session in championing necessary reforms to our tax system,” Edwards wrote, “and I invite the next Administration and Legislature to continue moving forward in reforming, modernizing, and improving Louisiana’s tax laws.”

Allain said he disagrees with the governor’s concerns about fiscal uncertainty.

“I think we missed an opportunity,” he said.

Allain also took a hit from the right in the form of a press released by the conservative Louisiana Freedom Caucus.

The release revolves around the vote in this year’s legislative session to raise the state spending cap. Allain, the press release said, went along with a conference report that stripped funding for projects in state Rep. Beryl Amedee’s district after she became one of 19 representatives to vote against lifting the cap. That missing funding included $15 million for road projects and sewage system improvements in Morgan City.

“The irony here,” the press release said, “is that Sen. Allain’s kissing the ring of the governor did not save [SB1] on the very day he had the hubris to condone the punishment of [Amedee].”

“That doesn’t surprise me,” Allain said about the press release. “That whole bunch is a little off the wall.”