In a blow to the business community, voters rejected an amendment centralizing sales tax collection in the state. Voters did, however, back reforming the way income taxes are handled in Louisiana.
Amendment One (Sales Tax Centralization)
Under the current sales tax collection policy, state businesses have a patchwork of various local and state-level entities to whom they report sales tax collections. Should this amendment have passed, pending some additional work, all sales tax collection would have been reported to one centralized state commission.
That commission would have been tasked with collecting all sales taxes, whether they be the 4.5% state rate, local sales tax rates (which can vary), and remote and online sales taxes. They would then distribute those funds out to whichever entity, be it local or state, that is entitled to them.
The change has been long sought after by many, if not nearly all members of the business community. Louisiana is one of the few states that still has a decentralized sales tax collection system wherein local entities are constitutionally imbued with collection powers.
The state’s most powerful business lobby, The Louisiana Association of Business and Industry, strongly backed the amendment, along with other business groups like the National Federation of Independent Business. Supporters said it would have made it much, much easier for businesses to file their taxes.
Historically a move to centralized collection faced staunch opposition from local political leaders. New Orleans Mayor Latoya Cantrell led the charge this year against the move, citing concerns that under a centralized system it could take longer for local entities to receive sales taxes generated in their jurisdictions.
Another concern became more prominent in the last few months; that under a state-run collection system political disputes between state and local leaders could result in funds being withheld, or slow-rolled to municipalities.
That point of contention became most prominent after a recent move by the State Bond Commission to pause funding on numerous construction projects around New Orleans, a move that came shortly after Mayor Cantrell announced you’d need to show your vaccine card to enter many city establishments. One member of the commission told WWL the move was not political retribution, but many in New Orleans doubted that answer.
Supporters of the centralization push contended that because the process will be largely automated, unlike the State Bond Commission, political disputes would not have resulted in the withholding of funds to local governments.
Amendment Two (Income Tax Reform)
Amendment Two, which passed, involves a somewhat complicated income tax reform that swaps the ability to deduct federal income taxes from your state liability in exchange for slightly lower overall state income tax rates. That’s the gist of it for most taxpayers, but the overall package contains a lot of other changes.
Passage also sets in motion somewhat similar reforms for business income taxes, a reduction of the franchise tax, and a few other items that seemingly are unrelated to the overall tax swap discussion, but still managed to make it into the amendment and accompanying legislation passed last spring.
Under the amendment individual income tax rates on income over $50,000 would drop to 4.25% from the current 6%, while income tax rates for income under that level would fall half a point or less. Backers also say the plan would simplify income tax reporting.
The proposal is touted by supporters as being relatively budget neutral, but a Public Affairs Research Council report notes after about two years it will cost the state about 27 million dollars a year in lost revenue.
Passage of the amendment also results in a new automatic tax reduction trigger that would be pulled should state revenue collections accelerate in the future.
Opponents, like the Louisiana Budget Project, say the amendment does basically nothing middle to lower-income Louisianans. Another concern raised involves the inclusion of a hard cap for income tax rates set at 4.25%. Opponents say that seriously limits the state’s ability to raise revenue should it face another fiscal cliff, or want to generate funds for crucial infrastructure projects.
Overall most Louisianans won’t really notice much of a change in their total state tax liability as a result of this amendment making it into law, but if they own a business, filing taxes will be more straightforward.
Amendment Three defeated
Amendment Three pertains to the taxing authority for levee districts. It would have allowed local levee district boards to, with a vote of just the board, raise a 5 mill property tax to help support levee repair and construction. With the amendment rejected, each new millage proposed will have to be approved directly by voters.
Amendment Four rejected
Voters also rejected Amendment Four, which would have doubled the amount of money, from 5% to 10%, that the governor can move from dedicated funds to the state general fund in the event of a budget deficit.
Currently, in the event of a budget crisis, the governor can, across the board, tap 5% of all funding from dedicated sources to plug a budget hole. Under the amendment, this number would have gone up to 10%. Public Affairs Research Council President Robert Travis Scott explained both sides of the argument.
“People who are in favor of it say it will help protect vital programs in the state and people who would not be happy with this amendment would say well it just sets you up to spend more money than you really have,” said Scott.