Louisiana NFIB state director Leah Long said the inventory tax places unfair burdens on small businesses.
Louisiana voters last weekend rejected all five proposed constitutional amendments on the ballot, including Amendment 4, a measure that would have given parishes the authority to eliminate or reduce the business inventory tax.
Amendment 4 had the support of business groups, which see the tax as a drag on investment and an antiquated policy that penalizes Louisiana’s efforts to compete for investment and expand the state economy.
“Louisiana continues to stand out as one of only seven states that fully taxes business inventory, an outdated policy that increases the cost of doing business and places our state at a disadvantage when companies decide where to invest, expand and create jobs,” Will Green, president and CEO of the Louisiana Association of Business and Industry (LABI), said in the wake of Amendment 4’s defeat on May 16 by a margin of nearly 2-to-1.
Gov. Jeff Landry supported the five proposed amendments, which were placed on the primary election ballot through overwhelming votes in the state Legislature.
The other measures on the ballot were Amendment 1, which would have streamlined the process to remove civil service protection for state employee positions; Amendment 2, which would have created a separate school district for the city of St. George; Amendment 3, a plan to increase pay for teachers and school staffs and dissolve state education funds; and Amendment 5, a measure to extend the retirement age of judges from 70 to 75.
The Louisiana state director of National Federation of Independent Business, Leah Long, expressed disappointment over the defeat of Amendment 4.
“We don't think it's fair to pay sales tax on things like desks and chairs and laptops and equipment and then have to pay taxes on the same items year after year after year,” Long said in a statement emailed to the Louisiana Record. “We can't be sure why Amendment 4 failed, but business personal property tax reform is important to small businesses, and we'll keep trying to bring about change.”
Amendment 4 would have given parish officials the authority to reduce or eliminate the business inventory tax, depending on whether local officials believed the tax was a burden on parish economic activity. The measure also provided one-time state payments to offset the lowering or elimination of the tax.
But according to the provisions of the measure, a parish action to scrap the tax could not be reversed in the future.
As a result of the vote, “Louisiana businesses are stuck paying a tax on inventory despite their ability to generate a profit, limiting capital that could otherwise be used for hiring, wage growth and expansion,” Green said.
He added that LABI would continue to work with policymakers and local officials to improve the state’s business climate and work for a more sensible tax structure.
In some circumstances, businesses can obtain a credit to help offset the inventory tax, but critics say the process is complicated. Business inventories are now generally taxed at a rate of 15%.
In a recent article, the Pelican Institute for Public Policy in New Orleans said Amendment 4 would have offered benefits such as flexibility and local control.
“(The current) structure creates a unique disincentive: The more inventory a business holds – usually a sign of growth or expansion – the higher its tax burden,” the article states. “Furthermore, there’s the added burden of compliance costs associated with business inventory taxes, as taxpayers must assess their tax liability themselves.”
Amendment 4 opponents argued that eliminating or reducing the tax would have led to a shift in the burden of paying for essential local services to other taxpayers and that it could have led to budget deficits.
