You can expect to hear much about tax reform this legislative session, which begins April 10.
Throughout 2016, a 13-member tax advisory panel put together by Gov. Edwards has been meeting to examine the state’s overall tax system and make recommendations on overhauling it to the governor and the Legislature. One of the top priorities is dealing with the sales tax, as Louisiana currently has the highest sales tax rate, as well as the most complicated sales tax system, in the nation. To begin, the panel recommends not renewing the temporary 1-cent sales tax increase that was passed in a special session in early 2016 to address a budget shortfall. This is set to sunset in mid-2018. The panel also recommends expanding the sales tax to other activities, such as cable TV, concerts, and football games, reports The Advocate.
Unification of the tax base is another recommendation from the tax advisory committee. Currently, the state exempts a set of transactions from the sales tax, while local governments exempt another, making Louisiana one of only three states without a uniform sales tax base. The panel’s members have also called for streamlining tax collection so that a single entity collects sales taxes instead of the state collecting its sales taxes while parishes collect theirs separately, as in the current system. Seventy percent of Louisiana small business owners support centralized sales tax collection.
Meanwhile, Gov. Edwards has abandoned plans to propose changes to Louisiana’s income tax rates and deductions in favor of a gross receipts tax, which is a broad-based tax on business transactions that would replace the current corporate franchise and corporate income taxes on profits. Under the proposal, The Advocate reports, sole proprietorships, subchapter S corporations, and partnerships would be subject to the tax, provided they meet a minimum sales threshold. Four other states impose this tax, and the proposal for Louisiana is most closely modeled after Ohio’s: a 0.26 percent tax on all sales for businesses that sell at least $150,000 per year. Louisiana’s rate has not been determined yet, but is expected to be lower than 1 percent.
At this writing, more details were pending. NFIB/LA, among many other business groups, is awaiting further information on the governor’s plan, but plans to focus on tax reform as the main priority this session.
