The cascade of negative numbers continues at the State Capitol, as lawmakers grapple with a budget problem of record dimensions.
Among their difficulties: Tax breaks for businesses have cut revenue from two major business taxes. The state has paid out $210 million more in tax credits and rebates to corporations so far this year than it has collected in corporate income and franchise taxes, reports the Department of Revenue.
It’s important to remember that those aren’t the final numbers. In the end, the state’s economists expect corporate income and franchise taxes to net the state $359 million this year, but that would be $230 million less than expected in November. And no one can be sure that the entire $359 million will actually materialize given the lower-than-expected numbers so far and the state’s economic downturn, caused in part by slumping oil prices.
But the reality is that both taxes should be bigger earners, rather than unpredictable and potentially negative influences on the state’s balance sheet.
The Advocate reported in a 2014 series of articles that tax breaks for six major programs alone cost the state $1.08 billion in 2014, up from $207 million in 2004.
A report from the Revenue Department under former Gov. Bobby Jindal showed that most corporate taxpayers reporting big profits to Wall Street in 2012 avoided paying Louisiana taxes. And that’s from an administration that waved through tax cuts and corporate breaks, aided by a compliant Legislature that did not face the logical consequence of its actions.
The logical consequences are no longer avoidable.
Unfortunately, as new Gov. John Bel Edwards is learning, unwinding the mess is difficult. Every break has a constituency, and lawmakers in the GOP-controlled House and Senate continue to have close relationships with business lobbyists.
The good news is that there has been a growing and bipartisan appreciation that the state’s tax code — convoluted, targeted on the influential who get tax breaks — requires massive overhaul.
“Our tax code needs to be updated to reflect the modern economy,” new Revenue Secretary Kim Robinson said in an interview Thursday. “We’re giving away more than we can afford to give.”
But a massive overhaul means winners and losers, and the Legislature as a body has a hard time saying no to those who want to avoid taxes.
Every tax break was sold as “economic development” or an adjustment for ways that Louisiana is uncompetitive with its peer states. However, the notion that a negative income tax for some of the world’s wealthy corporations is a necessary “correction” is difficult to believe.