After a down month in May, cumulative state corporate tax collections were only $50 million so far with one month left in the fiscal year, the latest figures show.
The state was supposed to collect $359 million in corporate income and franchise taxes for the fiscal year that ends on July 1.
“We’re $300 million short,” Greg Albrecht, the Legislature’s chief economist, said in an interview, adding that the shortfall could deepen the hole that Gov. John Bel Edwards and his legislative allies are trying to close during the current special session.
“Obviously, that’s more terrible news for programs and services funded in the budget,” said Jan Moeller, director of the Louisiana Budget Project, a Baton Rouge-based nonprofit. “Clearly, something is wrong. We need to understand why this is happening. Is it due to the economic slowdown or with the ways we collect corporate taxes?”
The low tax collections through May are bound to spark complaints on both the left and the right that the corporate tax code is riddled with too many tax exemptions — a major topic of discussion Wednesday before the Senate Revenue and Fiscal Affairs Committee when Democratic senators beat up on business lobbyists defending their tax breaks.
Corporate tax collections also may be down because the drop in oil prices has pushed the state’s economy into what economists say is a recession.
Through April, corporate tax collections were $74 million but were negative $23 million in May, according to the state Revenue Department.
The drop in May followed positive collections for the three preceding months.
“I’m surprised,” Albrecht said. “We were moving in the right direction for three months. Then May comes along and boom — it’s a negative number.”
Revenue Department figures show the state collected $894 million from corporations through May and paid out $844 million in refunds to make the total net collections $50 million thus far.
Through May 2015, the state collected $888 million from corporations but paid out only $508 million in refunds to make the total net collections $376 million then.
Albrecht said it wasn’t clear whether corporations are claiming more refunds this year because their income is lower than expected, leaving them with higher-than-expected overpayments, or because they are more adept at claiming tax credits and deductions. State Sen. JP Morrell, D-New Orleans and the chairman of the Revenue and Fiscal Affairs Committee, said he is certain that lawmakers have been too generous in granting corporate tax breaks.
“Every day, as we struggle to find ways to pay for services, greedy companies are using exemptions and loopholes to avoid paying what is owed, while we resort to continually taxing everyday citizens,” Morrell said in an interview.
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