Phases out corporation franchise tax (RE -$36,500,000 GF RV See Note)
The bill is expected to have a substantial impact on the state’s revenue, potentially resulting in a loss of approximately $36.5 million in general fund revenue. Proponents argue that phasing out the corporation franchise tax will enhance Louisiana's competitiveness, allowing businesses to reinvest savings back into the local economy. However, there are concerns about the long-term implications of reduced tax revenues for state services and whether such tax breaks will lead to sustainable economic growth or merely benefit larger corporations at the expense of smaller businesses and local economies that may rely on the revenue generated by this tax.
House Bill 828 proposes the phased elimination of the corporation franchise tax in Louisiana, impacting both domestic and foreign corporations doing business in the state. The current tax structure includes rates based on taxable capital, where the primary rate is $1.50 per $1,000 for the first $300,000 and $3.00 for amounts above that. HB828 intends to reduce these rates cumulatively by 20% each year starting January 1, 2016, ultimately eliminating the tax by January 1, 2020. This significant change aims to foster a more business-friendly environment by removing what some stakeholders consider a financial burden for corporations operating in Louisiana.
While the sentiment around HB828 appears largely positive among business advocates who view the tax reduction as a step towards economic development and job growth, there remains skepticism from certain governmental and community sectors regarding the wisdom of eliminating this tax. Critics express apprehension that the state could face fiscal challenges due to reduced revenue, especially in light of financing essential public services. Therefore, the debate reflects a broader concern about balancing business interests with the needs of a functioning public sector.
The discussions surrounding HB828 have highlighted contentions over fiscal responsibility versus economic stimulus. Supporters of the bill claim that reducing the corporate tax burden will attract new businesses and encourage existing ones to expand, thereby compensating for the initial revenue losses through increased economic activity. In contrast, opponents warn of potential long-term fiscal repercussions, questioning how these tax cuts align with the state's overall budget strategy and particularly how essential public programs may be funded in their absence.