Will business and industry go on the offensive for tax reform in 2007?

BATON ROUGE — It was a policy milestone for business and industry in 2004 when the state legislature approved a long-range phase-out of taxes on corporate debt and manufacturing equipment.

It was just about the time Gov. Kathleen Blanco and other state officials started pushing their “Open for Business” mantra, which took on a whole new significance following Katrina and Rita.

During last November’s hurricane-recovery session, special interests were also able to force through a small tax cut on electricity and natural gas, but the momentum came to a noticeable halt in this year’s regular session when lawmakers turned their attention to other matters having little or nothing to do with economic growth.

But the political landscape is shifting again and the next several months could be ripe with opportunities. Budget surpluses for this year and next could potentially top $1 billion and revenue forecasts remain somewhat bolstered by oil prices and recovery spending. To top it off, 2007 will be an election year complimented by term limits, which could make for a generous legislature.

Business advocates are already eyeing the situation and crafting a strategy that focuses on furthering the tax reforms already started. Still, the rosy fiscal situation could flip at any moment. State Treasurer John Kennedy, for one, has warned that the “recovery bubble” will eventually burst, leaving Louisiana in a less-than-desirable financial position.

The special interest groups interviewed for this story realize the likelihood of that scenario, but each argues their membership will be there to support the economy when the fizzle starts — and policymakers should make every effort to strengthen business and industry now.

Dan Juneau, president of the Louisiana Association of Business and Industry, one of the largest lobbies in the state, said readdressing the current phase out of the business taxes on equipment and debt are among his groups’ top priorities for next year.

“It would be nice if those tax reductions were accelerated, or even the taxes eliminated outright, but largely we just need to make sure they eventually come off the books,” he said.

The state sales tax on manufacturing equipment has been evaporating slowly over the past two years, with 35 percent coming off in July. More will be deducted each year until 2010, when all of the tax will be eliminated.

There should also be an effort to apply the equipment tax break to small businesses that rely on desktop computers and other more common machinery, said R. Charles Hodson Jr., state director of the National Federal of Independent Business, a nonprofit advocacy group with 6,000 members statewide.

“It’s a fairly narrow band of equipment that can be used, and unless you’re a huge manufacturer, you’re really not getting any benefit,” Hodson said.