On Thursday, we published part I of an interview with Michael Hecht, President and CEO of GNO Inc. regarding the Louisiana budget and the economy.
In general principle, we know that Louisiana is not bringing in enough revenue to serve the state government, yet, the economy has shown strong growth.
So, unless Louisiana were to make up the difference by raising revenue or cutting government, both which are highly controversial choices, something must give.
In part 2 of the interview, Hecht discussed the inventory tax rollback which has been proposed by Governor Bobby Jindal and which has been opposed by business interests.
Here is the transcript of that part of the interview. The discussion is the first segment of the video below.
One of the proposals from the governor is the inventory tax. I just received something from the Baton Rouge chamber and they are opposed, as I appreciate it, they are opposed to changes in the inventory tax. Is that the position of the Greater New Orleans Inc?
Well, there some nuance to it and it's, its a bit of of it a complicated and awkward tax. On its face value, we don't like inventory tax and I am sure our friends at BRAC (Baton Rouge Chamber) don't like it either. We're unusual, one of two or three states that tax people for the inputs of production. In theory, you're suppose totax things you don't like--like cigarettes, not tax things that you like--like inventory to build something in Louisiana.
The fact is the tax is there. And if you do simply as has been recommended by some people and repeal the tax so that it goes away, you're going to be doing--is undermining the parishes, particularly the parishes on the river, on the river port that we celebrate, some of them whom rely up to 40% of their ad valorem taxes on the inventory tax. And so, you don't want to undermine the parishes for two reasons. One, of course, you don't want to take away their ability to run schools and police and firemen but the other issue is that many of these parishes would have a legal requirement to then roll up their millages in order to meet their bond obligations and, and so, the counterintuitive impact is that for many of the companies that currently are getting reimbursed for the inventory tax and so they are essentially cash neutral. If it went away, their taxes would actually go up because the property tax would increase in those parishes. So simply getting rid of it is not a good solution. And what also has been proposed about just repealing or taking back the anything above the tax liability, that essentially would be a 400 and somewhat-odd tax increase on business. We don't think that's a good idea either. So trying to get back what BRAC is saying, I didn't see the statement, but is basically it is an unorthodox tax, we don't like it but getting rid of it unwinding it, is more complex than simply repeal.
In the next part of the Hecht interview below, we discussed the prospects of the state higher education system losing 82% of the state funding this year. If the inventory tax rollback is not an option, what is?
The problem for Louisiana is so much of the state budget is non-discretionary due to constitution and statutues. Options include freezing capital outlay, collecting Internet sales tax in Louisiana, a tobacco tax, selling the state lottery and conveying the remaining tobacco settlement.
Hecht said his organization’s goal in mending the budget tears, this spring, is to make sure the legislature does not disrupt the state’s economic progress and not tie the hands of the next governor to make real structural changes so Louisiana does not continue having annual budgetary nightmares.