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Louisiana Advisory Body Says Tax Breaks Needed for Recovery (1)

May 11, 2020, 6:04 PMUpdated: May 11, 2020, 7:04 PM

A business-led task force is advising Louisiana to use tax breaks to restore its economy. The state may lose $1.1 billion in taxes and fees in the next fiscal year. And a think tank warns that Congress should pay careful attention to the design of any program providing financial aid to the states. Here’s the latest on shifting state tax guidelines, deadlines, and policy to deal with the coronavirus pandemic. For Friday’s coverage click here. Here’s a state-by-state roadmap.

A private sector body created by the Louisiana Legislature to advise on economic recovery is recommending tax breaks for business and limiting employers’ liability for exposing people to Covid-19.

The Louisiana Economic Recovery Task Force on Monday presented recommendations to the House Ways and Means Committee for lawmakers to consider in the regular session that ends June 1.

The task force suggests protecting businesses and healthcare providers from being held liable when people might be exposed to the coronavirus, except when there is “gross negligence or willful misconduct.” It also would postpone businesses’ contributions to the state’s unemployment fund, and it would prohibit “unfunded mandates” such as requiring businesses to supply employees with personal protective equipment.

House Speaker Clay Schexnayder (R) said in the committee meeting that the plan would help small businesses.

The recommendations also include measures desired by business groups before the pandemic, such as ending lawsuits by coastal parishes against oil and gas companies, enacting measures discouraging “frivolous” lawsuits to bring down car insurance rates, and reversing changes made by Gov. John Bel Edwards (D) to the state’s largest tax incentive, the Industrial Tax Exemption Program.

The task force recommends but wouldn’t require individuals to participate in contact tracing. It also recommends centralized sales tax collections.

Louisiana Bracing for Budget Pain

The pandemic could cost Louisiana up to $1.1 billion in lost taxes and fees for the next fiscal year that starts July 1, the Legislature’s chief economist said Monday in a presentation to lawmakers.

Recovery will depend on people’s decisions and their comfort level in going out to shop, Greg Albrecht said during a Revenue Estimating Conference in Baton Rouge.

“We had three quarters of relatively good performance,” Albrecht said. “But then next year it’s all bad.”

With the rapid drop-off in oil prices, mineral sector revenues were expected to be down $182 million in the 2020 fiscal year and $436 million in the next fiscal year, Albrecht said.

After much of the economy shut down in the second half of March, coupled with uncertainty over the speed of the state’s economic recovery, sales taxes are expected to be down $177 million in fiscal year 2020 and $379 million in the next fiscal year, Albrecht said.

Motor fuels taxes were expected to be down $63 million in fiscal year 2020 and $52 million in fiscal year 2021, he said.

Changes from the 2017 federal tax overhaul are helping to offset some of the losses despite the spike in unemployment this year, Albrecht said. He forecast an increase of $217 million in personal income taxes in fiscal year 2020, along with a $35 million increase in the next fiscal year, which starts July 1.

Projections for corporate tax receipts were lower than in the past but Albrecht said he still expected an increase of $68 million this fiscal year and a $23 million increase in fiscal year 2021.

The more than 310,000 unemployment claims filed so far surpasses the 2005 economic downturn that followed hurricanes Katrina and Rita, Albrecht said. He said he was forecasting oil around $30 a barrel for the next fiscal year, down from $60 a barrel.

Design of Any Federal Aid is Critical, Think Tank Says

Congress should carefully consider the design of any additional federal pandemic aid program for the states, not just the size of the check, a Washington-based think tank argues.

The Tax Foundation, in a report released Monday, pointed to mounting evidence that states and municipalities will sustain tax revenue losses of between 15% and 20% during the public health emergency—roughly $480 billion for the 2020 and 2021 fiscal years. Those losses, coupled with rising costs for pandemic-related state services, have triggered expectations of additional federal support ranging from $300 billion to $1 trillion.

But the authors said Congress should avoid “simply picking a number.” Careful thought should be given to the structure of the aid package, providing states and localities with guidance on questions such as allocation of aid, spending flexibility, and redirecting existing appropriations. In addition, Congress should consider whether to provide additional aid in a lump sum, or distribute federal dollars over several months or years.

“If lawmakers wish to craft a state relief package,” it concluded, “they should act expeditiously but not hastily, as their decisions will cast a long shadow on state financial systems.”

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(Adds Louisiana budget forecast.)

To contact the reporters on this story: Jennifer Kay in Miami at jkay@bloomberglaw.com; Michael J. Bologna in Chicago at mbologna@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; David Jolly at djolly@bloombergtax.com