LABI applauds tax breaks for businesses; some legislators fear LA can’t afford them due to COVID-19

Tax Breaks for Businesses
Members of the Louisiana Legislature in the House Chamber.
Members of the Louisiana Legislature in the House Chamber. (Source: WVUE)

NEW ORLEANS, La. (WVUE) - State lawmakers wrapped up back-to-back legislative sessions and a business lobby is pleased bills to help struggling businesses won final approval, while some state lawmakers fear the state will face financial headaches down the road.

“There’s a huge question mark, a lot uncertainty,” said Rep. Royce Duplessis, a Democrat, who represents the city of New Orleans in the legislature.

Duplessis noted that the COVID-19 pandemic upended the state’s financial picture. Lawmakers used federal CARES Act dollars to avoid deep budget cuts.

“I think that it’s a situation that we didn’t anticipate coming into this legislative session where we had a surplus,” Duplessis said.

Besides passing a $34 billion operating budget for the fiscal year that began July 1, the Republican-controlled legislature also approved and expanded some tax breaks for businesses.

Jim Patterson, V.P. of Government Relations and Dir. of Taxation and Finance for the La. Association of Business and Industry (LABI) said the goal is to help small businesses that are trying to survive during the downturn in the economy.

“The feeling was that if they would be given some way to keep cash on hand it would help them with their cash flow and help them avoid any kind of difficulties in their reopening and also we wanted to encourage them to not only re-employ their workers but if possible actually bring in a larger workforce,” said Patterson.

LABI supported a number of business-friendly bills in the special session and regular session that came before it. “We felt that they were due a little love if you will from the state in terms of helping them,” Patterson said of businesses.

One of the bills allows businesses to keep a larger portion of sales taxes they collect for state government.

“For that service they are given what is called vendor’s compensation and allowed to retain some of those sales taxes. Our feeling was that this would help them with their cash flow, albeit a rather small amount,” Patterson stated.

Another piece of legislation broadens a tax credit program which is designed to create jobs in economically depressed areas.

“In an attempt to try and get businesses to go there,” said Patterson.

Duplessis is among the lawmakers who question whether the state can afford hefty tax breaks.

“Absolutely, just this fiscal year alone which begins today July 1, we’re looking at roughly $25 million in tax breaks and over the next five years about a quarter of a billion in tax breaks,” said Duplessis.

He said there are no guarantees average workers will feel a positive impact.

“I call it the myth that these tax breaks are going to some kind of way trickle down to the people who need it the most, our working mothers and fathers, people who are on the front-lines that are keeping our economy alive, those dollars don’t generally reach down to those people who need it the most,” said Duplessis. “We don’t really know what our revenues are going to look like, so we don’t know how this is really going to get paid for, so we could be really putting ourselves in a really dangerous and damaging situation down the road.”

Patterson agrees there is uncertainty but said things would be worse if businesses fail.

“If you do not have these businesses back in operation, if you do not have individuals employed and able to take care of their families and also generate the level of income taxes that these activities will generate then the impact on the state fisc[al] would be far greater,” said Patterson.

During the regular legislative session which preceded the special session, the legislature passed, and the governor signed into law a bill to send $300 million of the federal pandemic-related funds Louisiana received to small businesses.

And Patterson said LABI’s priorities in the first session also included the state’s Unemployment Compensation Trust Fund and not having the state charge employers for benefits paid to workers due to a COVID-19 circumstance.

“Taxing employers on their unemployment tax for over a half billion dollars next year would not be a good thing. Sen. Mike Reese authored legislation that we asked him to bring to address this problem and I’m happy to say that employers will not be faced with that, “said Patterson. “Now they will be paying higher taxes as we try to replenish the fund, but those taxes will be significantly less than what they were going to experience if we hadn’t changed the law.”

Because of the pandemic, early on Gov. John Bel Edwards shelved some of his priorities for the new fiscal year including more money for public school teachers.

“And we know that they are long overdue for pay raises, they’ve been promised pay raises and they certainly deserve those pay raises, but they weren’t able to be fulfilled this year,” Duplessis said.

Lawmakers are already bracing for a possible special session in the fall to address financial issues that may arise because of the pandemic.

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