Proposals to alter state inventory, watercraft taxes resurface

Proposals to repeal inventory and watercraft taxes or alter their credits have resurfaced a year after similar proposals were squelched following an outcry from industry and local government officials.

The taxes that contribute a combined $85 million to Lafourche and Terrebonne government agencies are caught up in the battle of state lawmakers looking to close a $850 million to $950 million budget gap before the fiscal year ends June 30. The next fiscal year’s shortfall is larger, estimated to top $2 billion.

Gov. John Bel Edwards is asking lawmakers to raise taxes in a special legislative session that opened Sunday.
In recent years legislators have taken aim at the inventory and watercraft tax credits as their combined costs have risen from $41 million in 1991 to more than $500 million and are projected to reach $1 billion by 2025.

Businesses receive dollar-for-dollar credits from the state for the portions of their property tax assessed on their offshore vessels and inventory.
Louisiana is one of only 13 states in the nation to assess a tax on business inventories, which includes materials waiting to be sold, commodities that will be used for production and other raw materials and supplies.

Business lobbyists, including the Louisiana Association of Business and Industry, say the taxes stunt industrial growth and the credits are why the state is facing repetitive billion-dollar deficits.

But local governments are opposed to repealing the taxes, which made up more than 54 percent of Lafourche Parish’s property tax base in 2015.
The offshore vessel tax generated $60.7 million in Lafourche last year, compared to $4.2 million in Terrebonne, according to Lafourche Assessor Wendy Thibodeaux and Terrebonne Assessor Loney Grabert. The inventory tax provides Terrebonne $10.1 million and Lafourche $8.9 million.
The Lafourche Parish School Board would lose an estimated $20 million without the two taxes.

House Bills 46 and 47, introduced by state Rep. Ted James, D-Baton Rouge, would suspend the credit or repeal only a portion of the credit, a notion supported by the governor. Industry officials criticized similar proposals a year ago saying that without the credit, companies have little incentive to be in Louisiana on Jan. 1 when assessors take count of property, including boats and inventory.

Another bill, House Bill 53, introduced by New Orleans Democrat Neil Abramson, would repeal the taxes and complex sales tax that would sunset in 2021. A proposed change to the state constitution, the proposal requires two-thirds support from the House and Senate and voter approval.
State Sen. Brett Allain, R-Franklin, plans to introduce a bill later this week that would repeal the taxes altogether but provide local governments with constitutionally protected revenue.

“The inventory tax is one of the structural problems with our budget,” Allain said Tuesday. “I’m trying my very best to fashion it to where the local money still flows to make everybody whole.”

Allain said he plans to meet with local agencies over the next week to lay out his plan and garner support.