Thursday, June 20, 2024

Waguespack: The Court Has Spoken …Will Louisiana Listen?

by BIZ. Staff

Each October, the United States Supreme Court begins its annual term to hear cases on a range of issues from across the country. These public hearings and private deliberations by the justices take place off and on for roughly nine to ten months, with court opinions typically coming out in May and June of the following year. In the last few weeks, the court has released several of its 2018 opinions, and this year’s batch held some significant findings, a few of which have particular consequences for Louisiana.

Specifically, the opinions by the Supreme Court in Janus v. American Federation of State, County and Municipal Employees and South Dakota v. Wayfair will force Louisiana to finally confront a few policy problems that have long warranted a smart solution.

In Janus, the court stated unequivocally that a government employee who does not want to join a union cannot be forced to pay dues or any other fee to that union. The majority leaned upon the First Amendment to justify its opinion, saying you cannot require government workers to financially support a political organization or political message they oppose. The unions argued government workers should be forced to pay up regardless of whether they agreed with the union’s political activities, claiming those workers likely get some benefit by union activity anyway. That ridiculous notion, which would be like forcing Leonardo DiCaprio to contribute to the NRA since he benefits from the protection of armed security each day, was finally laughed off the stage by the Court. It was a long time coming.

Speaking of a long time coming, this court ruling finally shines a definitive spotlight on an outdated Louisiana law that for 50 years has mandated state and local governmental bodies collect union membership dues from Louisiana employees and then invest those dollars in union political activities through payroll deduction. This practice is wrong and now arguably unconstitutional. Even worse, the dollars are big.

Stephen Waguespack

LABI polled several school districts around Louisiana last year, and the numbers were startling. In only six local school districts, roughly $4.5 million in union dues were deducted by government from Louisiana residents and sent directly to the state union office with little visibility on how those dollars were spent. It is estimated that 20 percent of that amount goes to the national union political efforts each year. Louisianans have long deserved more control over their freedom of speech AND their paychecks. The Supreme Court’s ruling should finally align the stars for this overtly political state law to be repealed during the next session.

In Wayfair, the court’s ruling may finally pave the way for sensible reform of how Louisiana calculates and collects sales taxes from its people. This ruling rescinds the previous requirement that an online retailer must have a physical presence in a state before being required to collect sales taxes. This left a mixed application for years, where brick and mortar stores in a state-collected sales taxes in the store and online, while others avoided the collection altogether. Now, the court said an “extensive virtual presence” qualifies for collection, which essentially encompasses all online retailers except for the smallest of businesses. The ruling also clearly stated a state’s tax and collection system cannot place undue burdens upon interstate commerce. This is the part where Louisiana again is now forced to deal with a long-term uncompetitive law that may prove to be unconstitutional. (See the extensive, well-drafted summary by the Public Affairs Research Council (PAR) for more details).

Louisiana does not currently have what is called “centralized collection.” In fact, every parish in Louisiana enforces their own sales tax collection methods, audit functions, rate definitions and exemption calculations. Other states don’t operate like this, and this method is largely viewed by economists and tax experts as confusing, uncompetitive and inefficient.

For instance, imagine if you operate a small business in Louisiana that has customers in every parish. You could end up remitting sales taxes on 64 different forms… with 64 different exemption definitions and rate calculations… and be subject to 64 different audits. This is a disincentive for investment in Louisiana and has the potential to add tremendous compliance costs for that small business. If that same employer had the same business plan in Texas, the compliance process would be much easier. They would have one sales tax remittance form, subject to centralized audits and uniform definitions and calculations. The cost of business is much lower under that system and the burden upon interstate commerce is minimal.

For years, there has been a chorus of voices to embrace centralized collection in Louisiana like other states. Concerns by local government to restrict this authority has previously prevented it from happening, but those days may be numbered. A process driven by a few local officials last year tried to bring about a compromise plan that would implement a version of centralized collection, but it was halted before it really got started, in large part due to strong objection by the state school board association. With the recent court ruling highlighting Louisiana’s unorthodox and uncompetitive assessment, audit and collection practices, hopefully, next session will bring those folks back to the table.

The news coming from the 2018 Supreme Court will long be remembered as significant in American history. The announced retirement of Justice Anthony Kennedy and the political battle that will take place to name his replacement will get all the ink. But these rulings changing how national unions have historically funded their political activities and how America taxes the booming digital economy will be just as critical for the nation going forward. These rulings should also speak loudly to the merit in finally changing a few outdated Louisiana laws… next legislative session I guess we will see if anyone here was listening.

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