BATON ROUGE, LA (WAFB) - Governor John Bel Edwards announced his tax policy ideas at a press conference Wednesday afternoon. The announcement comes less than two weeks before the start of the spring legislative session, when lawmakers are expected to consider tax reform proposals.
Under the plan, many Louisianans could end up paying less, while many businesses would foot more of the bill. The plan calls for eliminating a rule allowing people to deduct their federal income taxes paid from their state return – a rule that the governor and others have said largely benefits upper income earners. Meanwhile, the governor said the individual income tax brackets would change so that those making $140,000 or less each year could see the amount they pay in taxes reduced.
"More than 90 percent of individual tax filers in Louisiana would see an income tax cut," Edwards said.
The plan would also reduce the state sales tax by a penny – from five cents to four – while removing some exemptions to the sales tax. To balance things out, businesses would see changes as well, with some potentially paying more.
While corporate tax rates would drop and the franchise tax would phase out over the next decade, the plan would introduce a new tax that caught many off guard in recent weeks.
Called "gross receipts" or a "Commercial Activity Tax," under the governor's proposal, businesses would be taxed based on how much money they bring in overall, before expense deductions. Currently, businesses in Louisiana are taxed based on their profit - how much they take in any given year, once expenses such as payroll and purchases are deducted.
The governor said that, through tax credits and other incentives, too many businesses get out of paying taxes. He explained that of 149,000 corporate tax filers across the state, more than 129,000 did not pay taxes in 2015.
"What this approach is designed to do is to make sure those entities pay something, their fair share," he said.
Representatives from the business community, however, are already expressing concerns about these proposals. They want to see lawmakers rein in the state budget more. "We're just trading off one form of taxation for another, we're not making any real reform," said Dawn Starns, the state director for the National Federation of Independent Business.
Still, others are waiting to see more details once these ideas are turned into actual bills.
"This is an excellent first start - the top of the first inning in a long debate," said Jan Moller, the director of the Louisiana Budget Project.
Moller previously said the "gross receipts" proposal could have wide consequences, especially if stores decide to raise their prices to protect their bottom lines. "It is a form of a sales tax, a kind of hidden sales tax, and sales taxes in general tend to affect poorer people harder than rich people," Moller said.
Combined, the governor said his plan would generate enough money for the state to skirt the fiscal cliff currently staring down lawmakers in 2018. That's when many of the measures put in place to deal with last year's budget shortfall will disappear, leaving the state with a new deficit of more than a billion dollars.
In fact, he said, it would generate about $400 million more – money the governor said is necessary to pay for TOPS scholarships and K-12 schools in coming years. However, whether lawmakers will buy into a plan that brings in more money remains a big question. The session kicks off on Monday, April 10.