Corporate state tax collections continue to run in the red, according to the latest figures from the Department of Revenue.
Louisiana had paid out $218 million more to corporations in tax rebates than it had collected in corporate income and franchise taxes through February, up from minus $210 million thru January, the agency told The Advocate on Tuesday.
At this point a year ago, the state had collected $102 million more than it had paid out in corporate taxes, figures show.
The situation this year is “definitely worse,” Greg Albrecht, the state’s chief economist, said in an interview when asked about the latest number.
It is sure to increase the clamor — particularly from Democrats, including the Governor’s Office — that the state has been so generous in awarding tax breaks that big corporations are not paying their fair share, at a time when state finances overall are deep in the hole.
“We’re still continuing to subsidize business while we’re going through the exercise of trying to figure out how much to cut from higher ed and health care,” Rep. Ted James, D-Baton Rouge, said in an interview.
The latest number also concerns some Republicans.
“It’s evidence that some businesses are taking advantage of loopholes and the lax system we have on corporate taxation,” said Rep. Jay Morris, R-Monroe, who sponsored a bill passed during the special session that trims some sales tax breaks that businesses get.
A study released last year by the Department of Revenue found that of the 87 largest companies that filed corporate tax returns in 2012, only one-quarter of them paid corporate income taxes in Louisiana, even though 96 percent of those that make financial reports public said they were profitable.
Of the 87, only half paid corporate franchise taxes in Louisiana.
“Many companies received refunds from refundable tax credits that exceeded their income and franchise liability,” the report found.
Democrats and Republicans alike are positioning the Legislature to attempt to fundamentally alter Louisiana’s tax system in 2017. But whether lawmakers, who for years have been passing short-term measures to patch budget gaps, can exhibit the political will to make the tough decisions to carry out tax reform remains to be seen.
State officials are forecasting that corporate tax collections will end up $359 million in the black by June 30 when the fiscal year ends.
Albrecht said he is “crossing both fingers” that tax collections will turn sharply positive as usually happens during March, April, May and June.
“March and June are usually our best months,” he said.
Even if corporate income and franchise tax collections reach the $359 million, that amount would mark a sharp drop from what state officials as recently as November when they projected that collections would reach $590 million this year.
The drop in corporate tax revenue helps explain why the Legislature is grappling with a shortfall of about $800 million during the current regular session. Deep cuts in higher education and public health care seem likely to fill the gap.
Albrecht blames the drop in corporate collections on several factors.
One is a state economy dependent enough on oil and gas that it is probably in recession from the drop in oil prices.
Another is a three-year amnesty passed in 2013 by the Legislature — to avoid raising taxes — that has caused companies to advance tax payments during the amnesty period.
A third could be complications from the Legislature’s decision to trim a number of business tax credits by 20 to 28 percent last year.
The Legislature took several steps during the just-completed special session by passing legislation to make businesses pay more.
House Bill 55 by state Rep. Walt Leger III, D-New Orleans, aims to make it harder for multi-state companies to shift their income out of Louisiana for accounting purposes. Albrecht’s Legislative Fiscal Office was not able to determine whether it would raise more money.
House Bill 19 by James makes more companies subject to the franchise tax. It is projected to raise $10 million next year, according to the fiscal office.
The Legislature also approved House Bill 31 by Leger that will allow voters in November to decide whether to eliminate the state tax deduction that corporations get from their federal tax payments. Approval of that by voters would trigger collapsing the corporate income tax brackets — which range from 4 to 8 percent today — into a single 6.5 percent.
The combination of those changes — eliminating the deduction and creating a single corporate income tax rate — would raise $30 million per year beginning in two years, according to the fiscal office.
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