BATON ROUGE, La. (AP) – Facing certain defeat, Gov. John Bel Edwards gave up Tuesday on his effort to levy a new tax on business sales to help stabilize Louisiana’s budget, a move that throws his budget-balancing tax plan into disarray.
Rep. Sam Jones, a Franklin Democrat who sponsored Edwards’ proposal, pulled the bill after two days of hearings in the House Ways and Means Committee because of insurmountable opposition from the conservative, majority-Republican committee.
“The votes were not there,” Jones said.
Kimberly Robinson, Edwards’ revenue secretary, said the administration doesn’t intend to revive the proposal to enact a tax on a company’s gross receipts.
With the Democratic governor’s tax package upended, attention shifts to House Republican leaders to devise a path forward for balancing next year’s budget and coping with the loss of $1.3 billion in temporary taxes set to expire in mid-2018.
“The next move needs to be from the leadership of the House,” Jones said. “They need to lay out their plan to move this state forward and address the problem.”
A gross receipts tax is a tax on business sales, without consideration of profit or expenses. Edwards said the proposed tax, which he called a Commercial Activity Tax, would have made companies that use loopholes pay “their fair share.” He cites data that 80 percent of corporate income tax filers in Louisiana didn’t pay state income taxes in 2015.
But the idea gained little public support, even from the Democratic governor’s allies.
Business owners and lobbying groups hammered the concept. They told lawmakers a gross receipts tax could damage expansion plans, force businesses to shrink staff and chase away economic development deals. They said such a tax would be passed along to customers, who would face boosted prices and charges. And they rejected the suggestion that they don’t pay taxes, citing property, sales and payroll taxes on top of income taxes.
“The governor says we don’t pay our fair share. Honestly? That’s an insult,” said Mitch Rotolo, owner of Rotolo’s Pizzeria, which has 31 restaurants in four states.
Rotolo has been eyeing opening a store in Alexandria. But he told lawmakers: “You keep putting a burden on me, I can’t go there.”
Chris John, president of the Louisiana Mid-Continent Oil and Gas Association, said the tax plan would harm an industry that already is struggling. He said the state has repeatedly changed its business tax laws in the last few years, giving companies little clarity or certainty about what they will pay each year.
“We can continue to harm the business environment, but my problem is I just don’t even see that it’s going to fix” the budget problems, said Rep. Julie Stokes, a Kenner Republican.
The barrage of opposition came even after the Edwards administration tweaked the proposal, to strip most small businesses out of the bill. After the latest changes, a bill that once was estimated to bring in up to $900 million a year from new taxes on business was projected to instead raise $288 million.
“I think this is the end,” Robinson said of the gross receipts tax. “I think the message is we’re waiting for the Legislature to present a plan. We presented a plan. They indicated they do not like the Commercial Activity Tax, even with all the modifications we made to address the concerns.”
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