Gov. Edwards set to announce tax plan at press conference

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The announcement comes less than two weeks before the start of the spring legislative session, when lawmakers are expected to consider tax reform proposals.

The governor is expected to take some inspiration from a list of recommendations by the Task Force on Structural Changes in Budget and Tax Policy, which was created by the legislature and recently released a report outlining ideas for how to modify state tax policies in the upcoming session.

One of those recommendations was to reduce the sales tax, which was increased by a penny during last year’s special session to help fill in the budget shortfall. That increase made it the highest in the nation.

Another idea being floated by the Edwards administration was not among the task force recommendations and has caught many on both sides of the aisle off-guard.

The plan calls for changes to how businesses are taxed, creating a so-called “gross receipts” tax. Right now, 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.

Under the governor’s proposal, businesses would be taxed based on how much money they bring in overall, before the expense deductions.

In the business community, some worry it could amount to a tax hike, especially for businesses that already have small margins of income, such as grocery stores.

“The problem is if you are, for example, a startup business and you have a lot of front-end expenses, you won't get the benefit of deducting those,” said Jason DeCuir, with Ryan Advocacy and the Louisiana Association of Business and Industry.

Jan Moller with the Louisiana Budget Project said the plan could have wider 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 effect poorer people harder than rich people,” Moller said.

Ultimately lawmakers will get to choose whether to go along with the governor’s proposals.

Analysts warn that legislators must do something during this session if they want to avoid deep cuts to state programs going forward. In 2018, 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.

The question remains, however, whether there is enough political will-power to make changes to tax policy to avoid the fiscal cliff.

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