During the past seven years under Gov. Bobby Jindal, the Louisiana Legislature has cut taxes repeatedly for individuals and favored companies.
Don’t expect that to happen this year.
Facing a massive $1.6 billion deficit that threatens the future of the state’s colleges and universities, lawmakers have filed dozens of bills that would raise more revenue. Some measures would increase taxes on smokers and drivers, while others would end or trim tax breaks that allow many of the state’s biggest companies to pay little or no corporate income taxes, or even get rebates from taxpayers.
“I’ve never seen so many bills that generate revenue versus bills that take it away,” said Greg Albrecht, the Legislature’s chief economist. “The norm is the opposite.”
Albrecht estimated that up to 95 percent of this year’s tax bills would make individuals and companies pay more.
“It shows the interest from the membership, across party lines, to find ways to balance the budget and minimize cuts to higher education and health care,” said House Speaker Chuck Kleckley, R-Lake Charles.
The legislative session begins Monday afternoon with an address by Jindal to lawmakers.
The Legislature is expected to tackle myriad other issues, including efforts by Jindal and other conservatives to repeal Common Core, the program of higher academic goals for public school students and testing that can compare Louisiana students with the achievements of others around the country.
But how to plug the big deficit will be the major task, everyone agrees.
Much of the focus will be on the 462 tax breaks approved by legislators and governors over the years. As The Advocate reported in its tax giveaways series late last year, the annual cost for six tax breaks alone has soared from $207 million in 2004 to $1.08 billion in 2014.
Those tax breaks are for solar energy, to film movies and television shows in Louisiana, to create “quality jobs,” to invest in “enterprise zones,” for the state business inventory tax, and to drill horizontally for difficult-to-reach oil.
“We’re giving away the ranch,” said state Sen. Robert Adley, R-Benton, who is sponsoring two dozen bills that would raise more revenue one way or another. “I’m not in favor of just increasing taxes. I am in favor of some people shouldering more of the burden to make the system fairer.”
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. It added that only 25 percent of the largest companies in Louisiana reported taxable income, even though 96 percent of them are affiliated with companies that reported in public filings elsewhere that they were profitable. Many of those 87 companies got refunds.
“We’re paying a lot of money back to companies,” said Tim Barfield, the Revenue Department secretary.
Two other sets of figures also back claims that the tax system is unfair.
The Institute on Taxation and Economic Policy, a liberal nonprofit in Washington, D.C., reported in January that the poorest 20 percent of households in Louisiana pay an average of 10 percent of their income in state and local taxes, while the wealthiest 1 percent pay an average of 4.2 percent of their income in those taxes.
At the same time, corporate income and franchise tax collections have plummeted from $1 billion in 2007 to less than $400 million in recent years — during a period that Jindal has been trumpeting new jobs and investment in Louisiana.
“Corporations are getting better at tax avoidance,” Jan Moller, executive director of the left-leaning Louisiana Budget Project, said when asked why they are paying less to the state treasury while the economy is growing.
What’s striking this year is that Republicans are chiming in with Moller, and it’s not just Adley, who is retiring this year and won’t face the wrath of the anti-tax crowd during the fall elections.
State Rep. Lance Harris, R-Alexandria, is also calling on his colleagues to eliminate tax breaks. Harris cites figures showing that the state collected only $288 million in corporate income taxes in 2013, while tax breaks exempted companies from paying about $1.7 billion in taxes. “That was an 85 percent loss,” he said.
Rep. Julie Stokes, R-Kenner, has put her CPA skills to work and calculated that income tax revenue has dropped by $819 million over the past 10 years when inflation is factored in, and fees have dropped another $500 million in inflation-adjusted dollars.
Stokes also cites a Department of Revenue analysis that shows corporations claimed $65 billion in losses to operate in Louisiana. “I can’t help but ask why anyone did business in Louisiana if they lose that much money,” she said.
In fact, Stokes has concluded that companies that do business in multiple states are gaming Louisiana’s tax laws to show paper losses in order to avoid paying taxes here.
“I’m very pro-business and pro-economic development,” she said. “But in the environment we’ve been rendered into, if we’re not good custodians of state tax policy, we may have to raise taxes on people unfairly.”
Stokes is sponsoring several bills that would raise more money by limiting the deductions that multistate companies can claim.
What’s not clear is whether the changes sought by Adley, Harris, Stokes and others will pass muster with Jindal, who has consistently opposed measures that Americans for Tax Reform, the conservative Washington, D.C.-based group headed by anti-tax crusader Grover Norquist, deems a tax increase.
“We are open to working with the Legislature on different ideas to simplify the tax code and eliminate corporate tax loopholes,” Jindal’s press secretary, Mike Reed, said in a written answer to questions. “But, to be clear, we are not going to raise taxes on any Louisiana business or individual. Any reduction or elimination of credits, exemptions, etc, has to be offset by a corresponding tax cut elsewhere.”
Legislators don’t seem to have the political stomach to challenge Jindal’s definition of a tax increase, but they are getting weary of what they see as the governor’s strict obedience to Norquist’s group.
“I don’t have a full understanding of (ATR’s) guidelines,” said Sen. Neil Riser, R-Columbia, who chairs the Senate committee that will hear tax bills. “The thing I understand is we’re $1.6 billion short. My pledge is to the people of Louisiana.”
Jindal, who has had little contact with legislators lately as he travels to Iowa, New Hampshire and other early presidential primary states, has presented one major tax idea. It calls for ending the rebates that many companies receive when they pay the state inventory tax and 11 other taxes. Ending those rebates would raise $526 million.
Business leaders oppose Jindal’s proposal because they say it would amount to a tax increase and thus discourage investment and the creation of jobs. Jindal and Norquist don't view it as a tax increase.
The Louisiana Association of Business and Industry and the Baton Rouge Area Chamber on Wednesday stated their opposition to parts of Jindal’s tax plan even as leaders of the two groups called on the Legislature to protect colleges and universities from deep budget cuts.
How to reconcile those competing goals is especially unclear because the main revenue-generating plan the two business groups have suggested — freeing the colleges and universities to raise tuition as high as they like — would require approval by the state’s voters through a constitutional amendment in the fall at the earliest. As a result, it could not help the current budget problem. And raising tuition by 10 percent would raise at most $70 million per year.
“Everybody protects their individual interest,” Adley said. “That’s what they do. Our job is to view the state as a whole and find the fairest way to manage the state’s concerns.”
Follow Tyler Bridges on Twitter, @TegBridges. For more coverage of the State Capitol, follow Louisiana Politics at http://blogs.theadvocate.com/politicsblog/.