Monday, May 27, 2024

Committees advance bills to eliminate corporate tax, reduce sales taxes and extend incentives for movie industry

by BIZ Magazine

By Claire Sullivan and Oscar Tickle, LSU Manship School News Service

BATON ROUGE — Legislative committees advanced bills Monday to eliminate a key corporate tax, reduce sales taxes and extend tax incentives for the movie industry.

If the bills become law, they would cut state revenue by hundreds of millions of dollars at a time when many legislators are already worried that the state could be facing another fiscal cliff.

Other bills that moved forward Monday would reinstate an annual three-day sales tax holiday for purchases of guns and ammunition, provide $5 million in tax incentives for crisis pregnancy centers and exempt prescription drugs and insulin from local sales tax.

The committee actions came after the Louisiana House Conservative Caucus, which has 42 members, and the House Freedom Caucus announced they would oppose raising a cap on state spending to pay for recurring items.

Thanks to federal pandemic aid and relative strength in the economy, Louisiana has a $1.6 billion budget surplus. Gov. John Bel Edwards has proposed spending the extra money on infrastructure projects and ongoing items like pay raises for teachers.

But under a formula designed to limit overall spending, lawmakers can appropriate only $500 million of that total unless there is a two-thirds vote in each house to set aside the cap. And if lawmakers maintain the cap and approve new tax cuts, that could create new constraints on spending.

At its meeting Monday, the Senate Revenue and Fiscal Affairs Committee advanced and amended version of Senate Bill 1, which would repeal the corporate franchise tax over four years starting in 2025.

Sen. R.L. Bret Allain II, R-Franklin, the committee’s chairman and the sponsor of the bill, said he thinks the tax has “been an impediment for us to attract good companies here.”

But the tax brought in $350 million in fiscal 2022, and some fear its repeal could worsen a reduction in state revenues coming in 2025, when a temporary sales tax increase expires. 

Allain sought to address those concerns by adding the phase-out through an amendment and linking the proposal with Senate Bill 6, which would reduce the rebates under the Quality Jobs Program. 

The committee also advanced an amended version of Senate Bill 2, which also was proposed by Allain. It would call for a constitutional amendment to phase out a tax on business inventory and establish a maximum for exemptions under an industrial property tax exemption program.

Some lawmakers raised concern that eliminating the inventory tax would lead to increases in other taxes. Before the amendments, legislative analysts had estimated that the bill would reduce state revenues by $373 million over five years.

“It’s like buying a cat in a bag,” said Sen. Eddie J. Lambert, R-Gonzales. “You don’t know what you’re getting, you just know that you’re swapping it.”

Meanwhile Monday, the House Ways & Means Committee voted 9-4 to advance a bill by Rep. Tony Bacala, R-Prairieville, that would start reducing the temporary portion of the sales tax a year earlier than planned.

The temporary amount, 0.45%, was added in 2018 to help the state dig out of a $2 billion budget hole. Bacala’s bill would reduce the extra tax to 0.25% next year, costing the state $210 million in revenue before the tax expires.

“It forces us to start addressing the impending fiscal cliff early,” Rep. Bacala said.

But Rep. Tanner Magee, R-Houma, countered: “I don’t understand the logic of reducing the salary intentionally because I’m going to lose my job.”

The Ways & Means Committee alsoadvanced House Bill 562 byHouse Speaker Clay Schexnayder, R-Gonzalez, which provides a 10-year extension for tax credits to companies shooting movies in Louisiana.

Ending a suspension of the sales tax holiday for gun purchases earlier than previously planned would reduce state revenues by $2.6 million over two years, legislative analysts said. The bill was moved forward Monday by the Senate Revenue and Fiscal Affairs Committee.

The House Ways and Means Committee also supported House Bill 249 by Rep. Chris Turner, R-Ruston, to exempt prescription drugs and insulin from local sales taxes.  

Some lawmakers said this would cause a hole in local revenue in some areas. Legislative analysts estimated the local jurisdictions could lose tens of millions in revenue.

Turner said his aim was to help the elderly and people suffering from illness to pay less for medicine they need to live. But referring to local authorities, he said, “If I can’t come to an agreement with locals… I won’t bring this bill to the House floor.”

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