Louisiana’s much-maligned tax on business inventory withstood a serious legislative challenge Tuesday.
The state Senate rejected an attempt to phase out the tax on goods that businesses have on hand for sale.
State Sen. Bret Allain, R-Franklin, said other local taxes would have offset the lost revenue over the 10-year phase-out.
The Senate defeated his proposal, 17-20.
Assessors, sheriffs, school boards and municipal elected officials all opposed the bill for fear that the local taxes would not make up the difference. The Louisiana Association of Business and Industry and the Louisiana chapter of the National Federation of Independent Business supported Allain’s effort.
A task force that spent 2016 studying the state’s tax system recommended phasing out the inventory tax as an archaic way to tax business.
Allain picked up the baton for this idea, telling his colleagues in the state Senate that an executive order issued last year by Gov. John Bel Edwards to shave a popular tax break known as the industrial tax exemption would produce enough revenue over 10 years to make up the difference for local governments.
Academics and business groups have long knocked Louisiana’s tax on inventory — goods that bu…
In those parishes where it didn’t, Allain said, governments could charge higher property taxes by rolling up their millages.
He told his colleagues that his proposal would save the state $300 million to $400 million per year because of the inventory tax’s unique structure.
Businesses pay the tax on their inventory to local governments, then turn around and get the state to reimburse them. So eliminating the tax would produce the savings for the state while costing local governments an equal amount of money.
The inventory tax cost the state $225 million in 2016 in refunds to business, down from $569 million the year before.
Allain attempted to attach his proposal to Senate Bill 26 by state Sen. JP Morrell, D-New Orleans.
In the Senate, unfriendly amendments are known as hijackings.
Asked by state Senate President John Alario, R-Westwego, whether he supported Allain’s amendment, Morrell replied that Allain gave him advance notification of his effort but that he still opposed it.
“This is like the terrorist calling ahead of time and telling you I’ll be there Thursday,” Morrell said to laughter in the Senate chamber. “It’s still a hijacking.”
SB26 would no longer allow companies to apply the industrial tax exemption to the portion of their property taxes owed to schools. Morrell said Texas and other states do not allow companies to be exempt from school taxes.
The Senate defeated his measure, however, on a 13-24 vote.