The elephant in the state capitol

No one wants to talk about the elephant in the room but his name is Stelly

The elephant in the state capitol

In an effort to inform our members and readers of what we learn behind the scenes, today’s topic is just that.

Amy Ybarzabal, our Communications and Governmental Affairs Coordinator on staff, recently attended a tax presentation by Louisiana State Representative Julie Stokes, hosted by our partners at the Greater Hammond Chamber. Rep. Stokes’ remarks began with: no one wants to talk about the elephant in the room but his name is Stelly. Most of us do not realize that the Stelly Plan was not reversed completely. In fact, the “repeal” only got rid of the income from Stelly, which enabled the beginning of the budget bust.

One of the state’s chief economists, Greg Albrecht, said that Louisiana has entered into its own economic downturn, even as the rest of the country’s outlook is looking up. Albrecht said if Louisiana still had the original Stelly Plan in place, it would have about $800 million more in the bank each year. Yet some legislators who voted to repeal Stelly said they still think they made the right decision. It helped middle-class people and made the state more attractive to businesses. The collapse of the oil industry made it worse and Louisiana has not recovered from the recession.

Representative Stokes is the Chairman of The Louisiana Sales Tax Streamlining and Modernization Commission, which was established by Act 405 of the 2015 Regular Session of the Legislature. The purpose of this Commission is to conduct a study of Louisiana’s state and local sales and use tax systems. The Commission is tasked with developing recommendations for legislative consideration regarding revision of procedures, law, or Louisiana constitution concerning sales and use taxation in our state, with the goal of ensuring both revenue stability and taxpayer equity through the adoption of proven contemporary tax policies. The Commission has researched what other states are doing and what Louisiana can implement to improve the tax foundation ranking. A tax reform overhaul that includes a flat income tax rate, removes ties to federal taxation, and phases out franchise and inventory taxes is the expected recommendation. These reforms could increase our Tax Environment Rankings by 11 points.

However, tax reform may have to wait. The second special session that has our legislators serving 19 consecutive weeks (the longest stretch in the legislative branch’s 204-year history!) was called to further increase taxes and cut exemptions even more. Greater Baton Rouge Business Report estimates, “roughly seven in ten Louisianans, or 72%, believe increasing taxes will keep businesses from relocating to The Bayou State, according to the results of a poll of 500 likely voters released last Tuesday by Baton Rouge-based Southern Media and Opinion Research. At the same time, 69% of respondents say they think increasing taxes will cause Louisiana businesses to cut back, while 52% say tax increases will result in job losses.”

Stephen Waguespack, President of Louisiana Association of Business and Industry agrees, “… this singular approach focused on new taxes to solve old spending and structural problems is threatening Louisiana jobs.”  When tax systems are complicated and unstable, economic development and job creation struggle to survive.

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