Supporters and opponents battled for the political upper hand Monday over the highest-profile tax measure during this year’s legislative session, a levy on corporate sales known as the commercial activity tax that is likely to suffer a quick demise.
The debate over House Bill 628 took place at the state House Ways and Means Committee, the first legislative step for the measure and likely the last one, with a vote scheduled for Tuesday.
“It’ll die,” state Rep. Alan Seabaugh, R-Shreveport, a conservative member of the committee, predicted in an interview. “I haven’t talked to anybody who’s for it.”
The tax’s expected defeat – during the third week of the 60-day regular session – should in theory force Gov. John Bel Edwards and his opponents to turn to a Plan B.
What that Plan B might be, no one could say with certainty on Monday.
“There are many instruments in the process,” Kimberly Robinson, the secretary of Revenue, said in an interview after the Ways and Means Committee adjourned following about four hours of debate over HB628.
Edwards has been pushing the tax as the best way to make up a big chunk of the revenue that the treasury will lose next year when $1.3 billion in taxes expire. As Edwards has complained repeatedly, opponents of the tax, led by Republicans in the House, have yet to explain how they would make up the revenue other than to say they want to spend less money next year. Capitol insiders say the expiring taxes have created a “fiscal cliff.”
“Once they kill it, we can move on to other discussions about tax and budget reform,” state Rep. Tanner Magee, R-Houma, said in an interview.
Robinson and state Rep. Sam Jones, D-Franklin, the sponsor of HB628, took turns defending the measure Monday against skeptical questions and comments from Republican committee members.
The committee will take testimony from the public Tuesday before voting on the measure.
When Edwards first unveiled the commercial activity tax, he said it would raise $800 million to $900 million per year to replace the revenue to be lost from a temporary one-cent increase in the state sales tax that lawmakers approved last year only through June 30, 2018. The expiring sales tax makes up the bulk of the $1.3 billion fiscal cliff.
The measure before the committee would raise only $416 million per year after Edwards and Robinson softened the bill’s bite in what appears to be a failed attempt to make it more palatable to business.
The projected revenue lost from making those changes means that Edwards is at least $200 million to $300 million short of the revenue needed to head off the fiscal cliff, even if HB628 won legislative approval.
Officials in Gov. John Bel Edwards' administration are now admitting that the proposed Comme…
Speaking before the committee, Robinson and Jones noted that the commercial activity tax would hit only businesses that have at least $1.5 million per year in sales. It would kick in as an alternative minimum tax for many businesses that escape taxation under the corporate income tax, they said.
Jones repeatedly cited statistics showing that 80 percent of Louisiana businesses pay no net income tax, and he cast the measure as a way to help struggling families, making the point that big businesses would have to pay the tax while families would save by the expiration of the penny sales tax increase.
“All of the nice suits and the people in them and the million-dollar lobbying effort to kill this bill are not here for them,” Jones said, referring to opponents who were waiting to testify against the bill. “These folks have no lobbyists except for you and me.” (One business lobbyist tweeted afterward that she is a mother who buys Burlington suits from the clearance rack.)
Jones noted that the Legislature during the eight years of Gov. Bobby Jindal cut spending on the state’s colleges and universities by $700 million, money that the institutions have made up mostly by charging higher tuition.
“Let’s do something for the forgotten folks, the people who are paying those schools notes, paying through the nose for it,” Jones said.
Republican members of the committee held their populist ground, telling Jones that they were the ones standing up for the little guy by opposing HB628.
“When we disparage business, we forget that our constituents need business,” said state Rep. Barry Ivey, R-Central. “They do create very good, high-paying jobs.”
State Rep. Dodie Horton, R-Haughton, seconded that point.
“I don’t see this as a fair tax,” Horton said. “I don’t see this as a way to promote growth.”
The Democratic members of the committee plotted strategy with Edwards before the committee hearing began, agreeing to have state Rep. Robert Johnson, of Marksville, offer an amendment to keep S Corporations and limited liability companies – which file their taxes on individual income returns – from being subject to the tax.
The amendment, which will be before the committee on Tuesday, aims to emphasize the Edwards administration’s point that it is trying to make big business pay its fair share.
Questioned on Monday by Republicans, Jones repeatedly challenged them to identify their plan to fix the fiscal cliff.
“If somebody has a better idea….” he began to tell Ivey before Ivey cut him off.
“I do have a better idea,” Ivey responded and noted he has offered a comprehensive tax bill that Ways and Means has debated but not voted on.
State Rep. Clay Schexnayder, R-Gonzalez, said Jones’ bill will hurt business and in turn the families that Jones said he was defending.
“If we discourage business from investing, that family may not have a job to get to,” Schexnayder said. “We have to change our structure.”
“Do you have a bill to do that?” retorted Jones.
“No,” Schexnayder replied.