iStock_000001934992_LargeNewly elected Louisiana Governor John Bel Edwards recently outlined his short-term and long-term plans to close the $750 million budget gap in the current fiscal year and tackle the $1.9 billion gap in the upcoming fiscal year. The current fiscal year ends June 30.

A full copy of the Governor’s plan showing short-term and long-term “options” can be found here.

In addition to proposing a minimum of 10% cuts to discretionary funds and tapping the State’s rainy day fund, the Governor outlined a number of specific revenue raising measures that would have an immediate impact, including:

  • Increase the State-level sales tax by “1 cent” (from 4% to 5%), with no exemptions to be applied to this additional “clean penny” sales tax, except for constitutional exemptions for groceries, prescription drugs, and residential utilities.
  • Increase the tobacco tax from $0.86 to $1.08 per pack.
  • Reduce or eliminate the federal income tax deduction on Louisiana tax returns.
  • Require internet retailers to collect and remit sales tax.

Notably, the Governor also proposed a number of measures that will have a significant ramification on Corporate taxpayers:

  • Suspend and further cap the Net Operating Loss Deduction for corporate income taxpayers.
  • Suspend and cap the refundable ad valorem tax credits for business inventory, offshore vessels, and telephone companies.
  • Eliminate the Business Utilities Sales Tax Exemption, which would require businesses to pay the full 4% sales tax on utilities.

Although most of the Governor’s reforms are designed to address the immediate budget gap, the Governor also outlined a number of long term proposals, including:

  • Implement a flat income tax for corporations (removing the 4%/6%/8% rates).
  • Change the apportionment formula for calculating corporate income tax, possibly double-weighting sales.
  • Enact an add-back provision for corporate income tax.
  • Extend the corporate franchise tax to any entity subject to corporate income tax (including LLCs).
  • Extend the sales tax on hotel rooms to online travel companies (OTCs), Airbnb, etc.
  • Increase excise taxes on alcoholic beverages to regional averages.
  • Remove the sunset dates on recent legislative “haircuts,” including the 28% reduction in tax credits, the 20% reduction in certain economic development and incentive programs, and the limits on credits for taxes paid in other states.

Stay tuned for updates on what is promising to be an eventful extraordinary session of the Louisiana Legislature.