Officials in Gov. John Bel Edwards' administration are now admitting that the proposed Commercial Activity Tax would raise $400 million next year, not $800 to $900 million, as they originally projected, because of changes meant to make it more palatable to businesses.
Making those changes means that Edwards’ overall tax package no longer would raise enough money to head off the “fiscal cliff,” when the $1.3 billion in temporary taxes will fall off next year.
“We’re $200 million to $300 million short,” Kimberly Robinson, the secretary of Revenue, said in an interview, adding that administration officials are examining ways to make up the difference.
One change made by the administration to the commercial activity tax spells out that “pass-through entities” — businesses such as limited liability corporations or sole proprietorships that choose to file individual income tax returns — with taxable gross receipts under $1 million per year would pay no more than $500, while those with taxable gross receipts above $12 million would pay $12,500 per year.
The other change would allow retailers and wholesalers to deduct the cost of their goods sold. This change attempted to assuage concerns of businesses, such as grocery stores, that the commercial activity tax would hit them unfairly because they have huge amounts of sales with low profit margins.
The CAT is a centerpiece of Edwards' budget plan to address a fiscal cliff the state is facing when the additional one-cent state sales tax expires next year.
But he's already facing an uphill battle as he tries to win support for it.
Edwards on Friday conceded that even his conversations with state lawmakers about the controversial Commercial Activity Tax have given little indication that the proposal will pass.
"I wouldn't say that the conversations I'm having are terribly different than what you're having," Edwards told reporters on Friday when asked if he had any reason to believe his tax plan could garner support.
Two weeks into the 60 days of regular session, Louisiana House Republicans have settled on t…
Several legislators have suggested that the bill has no chance of passing. The bill, which is sponsored by Rep. Sam Jones, a Franklin Democrat who was Edwards roommate and seat-mate when the governor served in the House, is scheduled to get its first committee hearing on Monday.
Edwards said he is still waiting alternative plans from the Republican members of the House.
Gov. John Bel Edwards' complicated commercial activity tax proposal was already expected to …
"I'm disappointed that I have yet to see anything that resembles an alternative plan," Edwards said, taking aim at his critics.
But Jones has seemingly offered up his own plan B, should the corporate tax change fail. Jones is sponsoring another bill that would extend the additional state sales tax penny, slated to expire next year, another five years.
Edwards said that's not a back-up plan that he asked for or even supports.
"The Legislature last year decided when we imposed the fifth penny (of sales tax), that it should roll off June 30, 2018 and as I've said before we should stick to that date," he said. "That is certainly not plan B."
Edwards again made his case for the controversial proposal to a group of business and community leaders at the Public Affairs Research Council's annual luncheon.
"Structural change requires that we work together," Edwards said, noting that the legislation will require support from two-thirds of each legislative chamber.
He told the crowd that 80 percent of corporations that file tax returns pay no taxes, because of various exemptions and the current taxing levels.
"I believe we ought to do something to restore fairness," he said. "(The CAT) is a way to restore fairness, to partially address the cliff we have coming up and will function basically as an alternative minimum tax."
He again knocked Republican legislators who oppose his proposal as having "no plan."
House Republican leaders have recently offered up a budget outline that they expect to present and have said that they are working toward a budget plan that could include several pieces.
Edwards said that he remains optimistic.
"It's still early," he said. "Maybe we will get there. I sure hope we do because we owe it to the people of Louisiana."
Elizabeth Crisp of The Advocate Capitol news bureau contributed to this report.