Louisiana’s business community has won legislative battle after legislative battle during Gov. Bobby Jindal’s seven-plus years in office.
But business lobbies have been on the defensive this year as lawmakers propose to plug Louisiana’s massive $1.6 billion budget deficit by taking away hundreds of millions of dollars in tax breaks and subsidies given to companies over the years.
Republicans who traditionally have been the business lobby’s biggest champions in the Capitol are sounding like Democrats this year.
“Corporate welfare” is Jindal’s phrase to describe $526 million in tax rebates that businesses get from state government for paying 12 different taxes.
“We’re giving away the ranch in tax breaks,” said state Sen. Robert Adley, R-Benton. “We can’t keep doing that.”
The effort to trim businesses’ tax breaks has pitted the business community against the state’s public colleges and universities and health care providers, who lawmakers say face crippling budget cuts unless business starts paying more in taxes. Their argument is especially potent now because the Jindal administration and the Legislature have sharply cut state spending on higher education and hospitals, nursing homes and the developmentally disabled in recent years.
In trying to protect their tax breaks, the business lobbies, led by the Louisiana Association of Business and Industry, are not swayed by arguments that using the money to fund hospitals, universities and other programs would create thousands of jobs and benefit Louisiana’s economy.
“The discussion now is to lower (tax) exemptions to fund large government,” said Stephen Waguespack, who is LABI’s president. “The focus has been on raising taxes on business.”
LABI is also opposing a 10-cents-per-gallon increase in the gasoline tax that supporters say would help the economy by fixing roads and bridges whose deficiencies leave drivers stuck in traffic.
LABI instead is supporting two measures that would reduce business taxes. One would repeal the inventory tax that businesses pay to local governments, but it has been stalled by opposition from sheriffs, police juries, mayors and school boards.
A proposal to phase out the corporate franchise tax, House Bill 828, is alive and will be heard before the House Ways and Means Committee on Tuesday. The tax cost businesses $140 million last year, so eliminating it would offset some of the higher taxes that businesses seem likely to have to absorb.
A series of numbers explains why lawmakers are targeting business tax breaks this year.
One is the conclusion by legislative leaders that they need to raise $1 billion more in tax revenue, along with cutting about $600 million in spending through such measures as not letting state employees’ paychecks keep pace with inflation.
Another is that the state gave away nearly $1.1 billion in taxpayer money in 2014 to subsidize six different business activities, as The Advocate reported last year. The incentives subsidize investment in blighted areas, the creation of jobs for low-income workers, producing movies, installing solar energy systems and drilling oil wells. Those same tax breaks cost much less, $200 million, in 2004, the newspaper found.
Two more key statistics: Tax collections for the corporate income and franchise taxes totaled $400 million last year, down from a peak of $1 billion in 2008.
And of the 87 corporations with the highest revenue in Louisiana in 2012, only 22 of them actually paid corporate income taxes in Louisiana, a study by the state Department of Revenue found.
Corporate tax breaks awarded by lawmakers over the years have exempted dozens of activities from taxation. To cite just three: Businesses don’t have to pay 1 cent of the 4-cent sales tax when they pay utilities bills, credit unions are exempt from most taxes and certain milk producers get a tax credit.
“The state could have collected $1.97 billion in corporate income taxes in 2013,” state Rep. Lance Harris, R-Alexandria, said just before the 2015 session began. “We collected $288 million, only 15 percent. That’s why I’m going to look at some of these credits. The Republican delegation is very concerned about the health care and higher education cuts.”
The Republicans in charge of the House showed their concern May 7 when they voted on 11 different measures that would raise the cigarette tax, scale back tax subsidies for filming movies and installing solar energy systems in Louisiana, and trim a variety of business tax breaks by 20 percent.
Appealing to his colleagues before the votes began, House Speaker Chuck Kleckley, R-Lake Charles, made a rare floor speech in which he said the members would be closing “corporate loopholes,” an effort he called “long overdue.”
“We are making tough votes for higher ed,” he added, because 2015 is an election year.
Kleckley was followed by Rep. Joel Robideaux, R-Lafayette, chairman of the tax-writing Ways and Means Committee. Robideaux said he had sponsored some of the business tax breaks in past years, but now he appealed to his colleagues to put a higher tax burden on business.
“There’s no greater incentive to businesses that are considering moving here than having an excellent higher ed system,” Robideaux said, “having an excellent health care system and providing the infrastructure and roads we need to make this state grow the way it needs to grow.”
With the support of the Republican leadership and most Democrats, the House passed bills that would raise $615 million in new revenue.
LABI’s lobbyists sent in notes to lawmakers on the floor expressing their opposition to the five bills that would make business pay the most, to no avail.
Founded in 1975, LABI’s mission, according to its website, is “to foster a climate for economic growth by championing the principles of the free enterprise system.”
Following that principle could have led LABI to lobby to eliminate the tax subsidies for the film producers and for solar energy that cost taxpayers a total of $300 million last year. Both of those subsidies distort the free enterprise system, critics say. But the group took no position on those bills.
The business community’s point man in playing defense has been Waguespack, who spends most of his days at the Capitol, plotting strategy with other business lobbyists, holding quick conversations with lawmakers and meeting with senior Jindal aides.
An affable 41-year-old lawyer from Gonzales, Waguespack was part of Jindal’s inner circle, first as executive counsel and then as the governor’s chief of staff. He left that job in 2012, spent a year working as a lobbyist for a law firm and then took LABI’s top job 18 months ago.
Waguespack has a team of lobbyists, and LABI works in conjunction with a phalanx of other lobbyists from the Louisiana Chemical Association, the Louisiana Mid-Continent Oil and Gas Association (which represents major oil and companies), the Louisiana Oil and Gas Association (which represents smaller oil and gas companies) and numerous individual companies.
In two interviews defending the groups’ anti-tax stance, Waguespack said legislators should be more focused on cutting state spending on pensions and so-called statutory dedications, by which nonprofit groups and local government entities automatically get state money without having to go through the appropriations process.
He also said colleges and universities would have more money if the Legislature allowed them to set their own tuition levels. Even if freed to raise tuition by, say, 10 percent, however, they would collect $70 million more, when the Legislature is threatening a $573 million cut in state money for them.
“There has been a lack of discussion about how to reform the budget,” Waguespack said, “about pension reform and about the statutory dedications. Making these changes can make a big impact on the budget.”
Waguespack rejected the notion that businesses are not paying their fair share, saying business tax collections have dropped because more and more companies are filing individual tax returns as limited liability companies or as S-Chapter corporations.
If so, why aren’t individual income tax collections rising?
Because of tax cuts given by Jindal and the Legislature when they repealed tax increases that were part of the Stelly tax plan, Waguespack explained.
Jan Moller, who is director of the Louisiana Budget Project, a left-leaning nonprofit based in Baton Rouge, said it’s time for businesses to pony up more.
“Legislators are asking only for a small haircut for a sector of the state that has not been asked to sacrifice one iota while colleges and health care providers and others have suffered deep cuts,” Moller said.
F. King Alexander, LSU’s chancellor and president, also seems to think businesses need to do more.
“In order to be a partner with the business community, you have to have a higher education system,” he said in an interview Thursday. “Colleges and universities need to be funded adequately so we can meet the business and industry demands of us. I’m getting ready to graduate 9,100 students. Most of them are going into business. That relationship needs to be firm and consistent. You can’t have one without the other.”
Follow Tyler Bridges on Twitter, @TegBridges. For more coverage of the State Capitol, follow Louisiana Politics at http://blogs.theadvocate.com/politicsblog/.