LABI goes hunting for tax reform in 2021

Encouraged by business-friendly legislation passed before the pandemic took hold last year, the chief of Louisiana’s largest business advocacy group has a list of priorities for the 2021 legislative session. And tax reform is at the top of the list.
“This is big game hunting,” said Louisiana Association of Business and Industry President Stephen Waguespack at a St. Mary Chamber luncheon Wednesday. “You probably can’t get it all done in one year, but the fact that they’re hunting is a big, big deal.”
In the audience at the Petroleum Club of Morgan City was one of the top hunters: state Sen. Bret Allain, R-Franklin, who told the Chamber earlier this year that he hopes to cut the state income tax rate in half while eliminating some deductions to make the system flatter and fairer. Allain chairs the Senate Revenue and Fiscal Affairs Committee.
“He’s whacking that piñata hard right now,” Waguespack said.
The Legislature hit a home run last year with pro-business legislation, Waguespack told the Chamber, especially in tort reform. Republicans were able to pass a series of changes, chiefly a lower threshold for requiring jury trial in auto crash cases.
At the top of LABI’s list of tax measures for this year is centralized sales tax collection. The current system of individual parish sales tax authorities complicates matters for businesses that do business in more than one parish, Waguespack said.
LABI would also like to see the franchise and inventory taxes eliminated. And an income tax rate reduction could be coupled with elimination of the federal income tax exemption.
Infrastructure is also a likely focus for the 2021 legislative session, he said, which raises questions about how to pay for better roads and bridges. The possibilities include a gas tax hike, repurposing an expiring 0.45% sales tax, using money raised by cutting tax exemptions, and dedicating some portion of that revenue from newly legalized sports betting toward the transportation system.
At the Louisiana Budget Project, an organization that generally follows the Democratic rather than the Republican line, Executive Director Jan Moller found little to argue with Waguespack about on sales tax centralization or even eliminating the federal income tax exemption for state income tax filers.
“The difference is what you do with that revenue,” Moller said in a phone interview Wednesday.
Tax reform shouldn’t be just a way to shift the tax burden to working people, Moller said.
“The Legislature should not use the pandemic as an excuse to cut taxes, especially on the wealthy. … The pandemic has hit low-income workers the hardest, both from a health perspective and from a job perspective.”
Waguespack believes conservatives in the Legislature are under pressure to create a better climate this year, when lawmakers will convene in April for a revenue-only session. Revenue measures will be out of bounds in 2022, and 2023 will be an election year.
“Lord knows what will happen in four or five years,” Waguespack said.
COVID-19 has drained what had been a $1.3 billion state unemployment trust fund, leaving the state government to find a solution.
Meanwhile, the generally conservative Tax Foundation ranks Louisiana 42nd among the state for business climate, and state income taxes are the highest in the South, he said.
Texas has no state income tax — but high property taxes, as Allain pointed out — and has neither the franchise tax nor the inventory tax that Louisiana imposes on businesses.
Waguespack called Texas Louisiana’s big brother. The little brother is Mississippi, which is moving to phase out its own state income tax.
“Little Brother is kicking our butt,” Waguespack said.
Federal COVID relief is uncertain and expensive, and the Biden administration’s policies seem likely to include higher taxes. The new president has already suspended Gulf lease sales.
“If they halt leasing for a number of years, that’s obviously bad for us,” Waguespack said.