The centerpiece of Gov. John Bel Edwards’ tax reform plan – a new tax on corporate sales, or Commercial Activity Tax – was revealed late Monday with the filing of House Bill 628 by Rep. Sam Jones of Franklin. The tax is projected to raise more than $800 million per year, which would be partially offset by a loss of sales-tax revenue as the temporary one-penny increase rolls off the books next year. Business groups and conservative legislators have criticized the proposal, but have yet to offer an alternative plan for addressing the state’s chronic budget problems. William Taylor Potter with The Manship School News Service reports:
“Right now, individuals in Louisiana are overly burdened by our current tax and budget structure, while too many businesses use costly credits and exemptions to avoid paying any corporate income taxes,” [Gov. John Bel] Edwards maintains. The commercial activity tax – often called the CAT – focuses on the total amount of revenue an organization receives from all sources, without deducting expenses. The tax would apply to most businesses, regardless of the organizational structure.
Potter highlighted LBP’s recent analysis of Gov. Edwards’ tax reform package, noting that the burden of the CAT would be shouldered most heavily by low and moderate income consumers:
While the Louisiana Budget Project (LPB), a group that analyzes the state’s fiscal issues, said the governor’s overall plan would give 95 percent of Louisiana’s families a tax cut, the analysis was less favorable of CAT. The project’s report said the tax is expected to generate $832 million per year, but there is the risk of a deficit if the tax does not generate the projected revenue in its first year. LPB also found the tax would hit low- and middle-income people harder, with the average middle-income family paying an estimated $198 per year.
Important to note: Viewed as a stand-alone bill, the CAT is indeed regressive. Viewed in the broader context of the sales-tax cut and income-tax reforms contemplated by the governor’s plan, it would make Louisiana’s tax structure more fair. But unlike the sales tax it aims to replace, which falls mainly on Louisiana residents, roughly half the CAT would be passed to consumers in other states.
Paying the tax man
How do Americans really feel about paying taxes? In a new book, Read My Lips: Why Americans Are Proud to Pay Taxes, Vanessa Williamson with The Brookings Institution finds that most people think they pay about the right amount in taxes, but many are concerned that corporations and wealthy Americans do not contribute their fair share. As William Galston from Brookings points out, federal policymakers should keep this in mind as they tackle tax reform:
The Pew survey found that 62 percent of Americans surveyed are deeply troubled that “some corporations” don’t pay their share. Almost as many Americans—60 percent—report being disturbed that some wealthy people don’t either. By contrast, only 1 in 5 Americans say they are troubled by the failure of poor people to chip in. As President Donald Trump ponders options for his tax reform proposal, he should consider the views of the voters who put him over the top last November. Only 25 percent of low-income Republicans complain about the amount they themselves pay in taxes; only 26 percent think poor people are shirking their responsibility to help fund the federal government. But 51 percent of these Republicans resent what they see as the failure of some corporations to pay their fair share of the tax burden, and almost as many—45 percent—resent wealthy individuals who don’t do so.
Bill would give prisoners a raise
Many incarcerated adults in Louisiana work and earn money while serving their sentence. A bill by Rep. Steven Pylant, former sheriff of Franklin Parish, aims to let them keep more of what they earn. Currently, sheriffs can withhold 64 cents on every dollar earned by prisoners in their facilities, taking money that could be vital to the offender’s successful reentry into the community upon release. Pylant’s bill is one piece of the larger criminal justice reform package moving forward this session. Julia O’Donoghue with The Times Picayune/Nola.com reports:
“I think it is wrong to take 65 percent of anyone’s money,” Pylant said in interview Friday (April 14). “I don’t think that was what was intended when [the prisoner job program] was set up. When we first talked about it, it was to let inmates accumulate money before they were let out.” His bill calls for prisoners to be paid at least $8 per hour. Currently, inmates may not be paid less than regular employees, though no minimum wage is set. Pylant’s legislation would prohibit taking more than $20 per day from an offender’s paycheck for a full day’s work, more than $10 per day for a partial day’s work.
Cleaning up the tax code
While the tax-writing House Ways & Means Committee struggles to piece together a tax reform plan, its Senate counterpart started down that path on Monday by passing several bills that curtail special-interest tax breaks. The Advocate’s Tyler Bridges has the story:
The question of what to do with tax exemptions will be central during the 60-day regular session — which began its second week Monday — with lawmakers needing to figure out how to solve next year’s fiscal cliff caused by the expiration of a temporary one-cent increase in the state sales tax as well as a host of temporary tax breaks.
The most far-reaching proposal is a constitutional amendment by Sen. J.P. Morrell of New Orleans that would require manufacturers to pay local property taxes for public schools, which are currently waived for up to 10 years. Sue Lincoln of WRKF-FM reports:
“Like many other states that have an Industrial Tax Exemption Program, it simply provides that the educational component cannot be given away,” Morrell explained. “Right now, when we build these magnificent, giant plants that attract hundreds of workers, we’re not providing moneys to the school boards to educate the new kids.” Kathy Waskom, a citizen activist, spoke in support of the measure requiring ITEP participants to still pay property tax millages that go to support public schools. “Locally, we vote for school taxes, and we have watched throughout the years the Board of Commerce and Industry, a state board, simply remove our school taxes,” Waskom said. “We’ve been watching this happen over and over since 1996.”
Number of the Day
15.1 – Number of days the state could stay afloat using all of the money in the Rainy Day Fund, down from 69.3 days in 2007 (Source: The Pew Charitable Trusts)