As Louisiana lawmakers look for ways to close a $1.6 billion budget gap, a key proposal from Gov. Bobby Jindal is raising red flags.
Gov. Jindal proposes to scale back the state’s expenditures on the refundable inventory tax credits which NFIB feels is a new tax burden on small business owners. Currently, small business owners pay an assessed tax to their local government on their unsold inventory at the end of each year, then in May they are refunded the amount paid when they file their state taxes. Under Gov. Jindal’s budget proposal and legislation such as House Bill 89 by Representative Harold Ritchie, the inventory tax credit would be eliminated completely or ratcheted down to 75% instead of 100%.
Gov. Jindal, who has been notoriously vocal about his opposition to tax increases, claims his proposal is not a tax hike, but a reduction in state spending. However, this move would affect thousands of business owners who would wind up with higher tax bills—to the tune of about $377 million—in the absence of these reimbursements.
“Small businesses operate on thin profit margins to begin with, and that refund can be enough to allow a small business to expand, hire an extra employee or, sometimes, keep the lights on,” said Dawn Starns, NFIB’s Louisiana state director, in a statement.
In a survey of NFIB/Louisiana members conducted Feb. 27 to March 2, 85 percent of members opposed this proposal, citing immediate and direct impact to their bottom lines, which would in turn have a negative effect on Louisiana’s slowly recovering economy.
Another option on the table, proposed by LSU economist Jim Richardson, is the elimination of the inventory tax altogether through a phase-out period of a few years. NFIB/Louisiana and other business groups support this, and Gov. Jindal’s administration has said it would support it as well, however the idea will face strong pushback from local tax-collecting agencies.
These budget proposals will be considered once legislative session begins April 13.
