When lawmakers begin the Louisiana Legislative Session on the 10th of this month, they will be fighting fatigue — both from multiple sessions to address massive budget shortfalls last year, as well as devising a way to increase revenue and cut spending without too much heartache on the public and business owners.
Although measures enacted in 2016 put the onus on businesses to generate enough revenue to close a billion-dollar-plus hole, many legislators have maintained they won’t go that route this year. Combined with an expanding budget, yet another gap and revenue generators set to expire next year, It’s created an atmosphere of uncertainty surrounding the capitol this spring.
With that in mind, BIZ. Magazine sat down with Greater Shreveport Chamber of Commerce President Dr. Tim Magner to find out what he’s seen from local legislators as well as how he sees it all shaking out for local businesses.
BIZ. Magazine: What is the main thing business owners should watch for from the upcoming session?
Tim Magner: The real test is going to be the extent to which legislators decide to deal with this year’s deficit exclusively, or plan to deal with the fiscal cliff that’s going to come next year. There is a $400 million gap that needs to be adjusted in the current budget. Then you’ve got the bulk of revenue measures that were enacted last year due to expire in 2018. And next year is not a fiscal session. Is there going to be energy around severing both sets of problems or serving only this year’s set of problems?
BIZ: After last year’s session that raised taxes to shore up a budget deficit, should small businesses fear they will bear the brunt of budget decisions again?
TM: Right now, the only options are cutting two areas or raising revenue. We don’t have enough revenue but we’re spending more than we’re bringing in. The challenge is that the way the budget is structured means the only places to cut are higher education and healthcare. We need to live within our means. We also need greater flexibility to move money around so we might not need to raise revenue to address expenses. If you’re not going to reduce expenses, that means raising revenue, that means taxes on businesses or reducing exemptions. There is a significant concern that the revenue raised last year was raised through business and I know our members and other business organizations are opposed to additional revenue being raised. And in some cases, some want to roll back taxes applied to businesses, which makes deficit challenge greater. There aren’t a lot of good options right now.
BIZ: With the discussion of tax reform, how could that help or hurt them?
TM: The devil is really in the details. the Task Force on Structural Changes in Budget and Tax Policy was put together to figure out what we should do and a lot of it was grow the base, reduce the rate, reduce exemptions, and streamline. None of it is radical, but that doesn’t mean some of it is not a good idea. Those type of things are going to need to happen to make the system functional. If you look at our tax system, it is one of the more broken in the country — high sales taxes, high income taxes, high taxes on business, high rates but a lot of exemptions and rebates. Some pay significantly less than the rate but others pay significantly more. There’s a way to do things differently that we should explore. If the answer we come up with isn’t the long term solution, we need to be sure it move us in the right direction.
BIZ: There is also talk of the inventory tax going away. Would that be a good thing for our businesses here?
TM: Again, it depends. The inventory tax is a way the state gives money to the localities. They collect the tax and the state reimburses it. That’s one of those things that doesn’t make a lot of sense in its current form. But what do you do about it? Do you create a different structure to enable business to provide those funds? One of the challenges we have is taxes levied at the local level, collected at the state level and then given back. We get back less money than we give to Baton Rouge. Here, we levy and collect locally which prevents money going to Baton Rouge. But it creates a disconnection between businesses, community, and the state. It’s not the best way to allocate those funds, but I’m not sure what the best way is.
BIZ: I know we’re looking into a crystal ball here, but will we have a better business climate after legislators adjourn this June?
TM: It depends on what factors you look at with regard to “business climate.” If we have a budget that is balanced and we don’t expect a mid-year cut, then that provides a level of certainty which is better for business than not. On the other hand, if we end up with a looming fiscal cliff then that’s going to be incredibly disruptive — businesses don’t know what’s going to happen to deal with that cliff, and we’ve found business is going to be first on the list when it comes to ways to raise revenue. If we don’t fix the big problem, you’ll see a lot of businesses that don’t want to deal with that uncertainty. If the trend line on the expense side continues to grow and revenue is not, that’s ultimately not great for a business climate.
BIZ: What should business owners do to stay in touch with the happenings in Baton Rouge?
TM: We are going to be down there for a lot of the session. We’ll be monitoring the bills and we look forward to input from our members directly. We have a public policy committee that works to identify a direction we need to go on a lot of these bills. This time, in particular, it’s important to advocate solutions, not just band aids.
My hope is that we recognize next year is a significant threat. The more we can do to create a stable the outlook for business, the better it’s going to be for everybody. If we fall back on uncertainty and opaque expense models, that level of uncertainty causes people to go elsewhere. We can’t afford that anymore. If we don’t make some hard choices, we’re not going to be able to dig our way out of this.