Wesley Muller/Louisiana Illuminator
Louisiana House lawmakers passed legislation Monday that would phase out the state’s corporate franchise tax revenue and partially offset the loss in state revenue by cutting a lucrative tax credit program.
The initial version of Senate Bill 1 would have repealed the corporate franchise tax, which is essentially a privilege tax corporations pay in order to do business in the state. It is levied at a rate based on the value of a company’s stock. A full outright repeal would have decreased Louisiana’s revenues by approximately $1.033 billion over a five-year period.
Allain amended the bill to gradually reduce the franchise tax rather than outright appeal it. It provides for a 25% rate reduction each year combined corporation income and franchise tax collections exceed $600 million with the excess deposited into the state’s Revenue Stabilization Trust fund.
The bill’s latest fiscal note estimates a reduction of $631 million in franchise tax revenue over five years, though Senate Bill 6 offsets a significant chunk of that loss by slashing the Quality Jobs tax credit program.
The Quality Jobs program, administered through Louisiana Economic Development (LED), offers payroll tax rebates to certain businesses for creating or retaining jobs — an incentive program that costs the state millions every year with a questionable return on investment.
Senate Bill 6 would reduce Quality Jobs tax credits 50% of their current value in any year the franchise tax is reduced.
Combined, the legislation’s net impact on state revenues would be a $163 million loss over five years, according to the fiscal note.
The package will return to the Senate before heading to Gov. John Bel Edwards for approval.
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