BATON ROUGE - Gov. John Bel Edwards is pushing significant changes that would shift more of the state tax burden to businesses, lessen sales taxes and raise hundreds of millions for next year's budget.
The tax package unveiled Wednesday would replace $1.3-million in temporary taxes set to expire in mid-2018, while also raising another $400 million annually, according to estimates provided by the governor's office.
Edwards says the effort is aimed at stabilizing state finances, ending continued cycles of deficits and raising new money for state priorities.
The tax package release came fewer than two weeks before lawmakers open their legislative session April 10.
The centerpiece of the package is a new tax on gross receipts, called a Commercial Activity Tax, estimated to raise up to $900 million a year from businesses.
Among the governor's recommendations:
PERSONAL INCOME TAX
- Eliminate a tax break that allows people to deduct the federal income taxes they pay from their state tax liability, in exchange for lowering overall income tax rates.
SALES TAX-
- Allow the expiration of a temporary, 1 percent state sales tax enacted by lawmakers last year and set to roll off the books on July 1, 2018.-
- Expand the remaining 4 percent state sales tax to be charged on services, like telephone services, cable and satellite services, news services, credit reporting services, debt collection services, insurance services, landscaping, lawn maintenance, garbage collection, property repairs, data processing services, massages and security services. This would begin Oct. 1.
- Remove exemptions from remaining 4 percent state sales tax. This would begin Oct. 1
.CORPORATE TAX
- Eliminate a tax break that allows businesses to deduct the federal income taxes they pay from their state tax liability, in exchange for lowering corporate income tax rates.
- Phase out the corporate franchise tax over 10 years.
- Enact a gross receipts tax on corporate sales, called a Commercial Activity Tax (or CAT), that will apply to most businesses, including retail, wholesale, service and manufacturing regardless of type of business organization.
HOW THE CAT TAX WORKS
- Businesses with gross receipts above $1.5 million would be subject to a tax rate of 0.35 percent. Businesses with gross receipts of less than $1.5 million wouldn't pay the tax at all, but rather a flat tax rate ranging from $250 to $750.
- The tax would be an alternative to the corporate income tax for those businesses that file taxes as corporations. A business would pay either the gross receipts tax or the corporate income tax, whichever is greater.
- Businesses that file their taxes through individual income taxpayer forms would pay the gross receipts tax if they reach the $1.5 million threshold, but that tax payment would lessen their income for purposes of income tax payments.
- Non-profit organizations, governmental entities, certain public utilities, some financial institutions and some insurance companies would be exempt from the gross receipts tax.
TAX BREAKS
- Make permanent reductions to some tax credits and tax break programs; eliminate some tax breaks and put expiration dates on others.