As Louisiana lawmakers on June 2 resumed work on piecing together a budget, their biggest unresolved financial question centered not on the coronavirus pandemic, but on how much they’ll want to give in tax breaks to help businesses recover from the outbreak.
The majority-Republican House and Senate called themselves into a 30-day special session that began immediately after their regular session adjourned on June 1. The special session agenda was drafted in consultation with business lobbying groups.
The session aims to finish crafting a $30 billion-plus operating budget for the financial year that starts July 1, but also consider tax credits, exemptions and suspensions for businesses that were shuttered or forced to reduce operations since March because of COVID-19, the disease caused by the coronavirus.
“We have a plan to try to put Louisiana businesses back to work because, ultimately, government can’t survive without a tax base, and so businesses provide that,” said Senate President Page Cortez, a Lafayette Republican who owns a furniture sales business. “If you don’t get them back stronger than ever, we’re not going to have the tax base. We’re going to be in problems and what we call `fiscal cliffs’ over and over.”
Rep. Ted James, who nearly died after being hospitalized with complications from COVID-19, panned the special session as a giveaway to business. He said business groups are seeking to tie a long-held wish list of tax proposals that failed in previous sessions to virus recovery in hopes of gaining traction for the ideas.
“They hijacked this whole pandemic. Pushing these in the name of COVID is shameful,” said James, a Baton Rouge Democrat. “It’s just not honest to the people of our state.”
James said the agenda has “nothing geared toward the workers who start these businesses up.”
Whatever tax breaks lawmakers decide to pass will lessen the state’s tax collections, at least in the short-term, requiring lawmakers to reduce spending to keep the budget in balance.
The current version of the spending plan that the House Appropriations Committee began reviewing doesn’t account for any tax cut proposals, including a few business tax breaks already approved by lawmakers in the regular session.
The 2020-21 budget proposal would use federal coronavirus aid and some dollars from the state’s “rainy day” fund to keep most programs and services from cuts. Modest reductions would fall on the health department, public college campuses and other departments.
Changes will have to be made to account for lawmakers’ passage in the regular session of a temporary suspension of the corporate franchise tax on some small businesses, estimated to cost $5.4 million in the upcoming budget year, and their creation of a new payroll subsidy for certain retailers and restaurants that could cost millions more.
Additional tax proposals awaiting debate in the special session could have a larger impact on the state treasury.
In addition to the tax measures, lawmakers already have passed a Republican-crafted plan that carves out $300 million for small business grants from $811 million in federal COVID-19 aid that Gov. John Bel Edwards wanted to steer to local government agencies for virus-related expenses.
The Democratic governor hasn’t said whether he’ll sign or veto the bill he opposed.
If upheld, GOP Treasurer John Schroder will oversee the grant program under a plan that must first be approved by lawmakers. Cortez said he hopes grants will start going out to businesses within 30 days.
More than 67,000 Louisiana companies have received approval for $7.2 billion in federal forgivable loans through the Paycheck Protection Program, according to the U.S. Small Business Administration.
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