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Parish could lose millions if state income taxes eliminated

By Kyle Barnett -   Feb 14, 2013

Parish could lose millions if state income taxes eliminated

A change in the way the parish collects taxes from local corporations could mean millions in dollars in budget shortfalls for numerous public entities.

St. Charles Parish President V.J. St. Pierre said that if Gov. Bobby Jindal’s plan to eliminate the state income tax in favor of an increased sales tax goes through, it could have a negative effect on the way the parish collects taxes from local corporations through inventory taxes. The parish could lose $7 million a year, while the Sheriff’s Office faces a loss of $8 million. St. Charles Parish Public Schools would stand to lose the most, with an estimated revenue drop of nearly $15 million.

The change could also usher in increased property taxes for parish residents.

"I’m very concerned," St. Pierre said. "We had a meeting with all of the parish officials last week and our senator and our representative on the inventory tax. This is something I am going to watch very closely and I’m going to need (the council’s) help with that probably during the legislative session."

Currently, the parish and other public entities levy an inventory tax on local industries.

Rep. Greg Miller (R–Norco) said the parish essentially receives tax revenue levied on inventory held within the parish.

"For example, Valero would be paying a tax to the local governmental bodies for maybe oil that is stored in their tanks," he said. "They would pay that to the parish, the sheriff or distribute it to the different entities."

Miller said corporations can appeal to the state government to have the inventory tax given back to them through a tax credit on their corporate income taxes.

Legislation that would eliminate the income tax for both individuals and corporations statewide has not been revealed yet. However, Miller said it is his understanding that without those income tax credits available to local corporations, the inventory tax to fund parish operations would be eliminated as well.

St. Pierre said the uncertainty of the issue is what is most alarming at this point.

"Nothing is definitely in writing yet, so we don’t know if the inventory tax goes away and (Jindal) imposes a 4 cent sales tax, will that 4 cent sales tax generate enough money to overcome this?" he said.

St. Pierre said if that revenue was not replaced, the parish would lose $7 million each year and the Sheriff’s Office would lose $8 million in revenue each year.

In addition, Jim Melohn, chief financial and administrative officer for St. Charles Parish Public Schools, said the local public school system would lose about $14.7 million per year, which would be just over 11 percent of the school system’s yearly budget.

"I would hate to even speculate on what devastating cuts would have to be made to offset that type of loss," Melohn said. "Statewide, the elimination of inventories from the property tax base would mean a reduction of over $128 million to Louisiana public schools alone."

Melohn said the introduction of a higher sales tax would likely not go to offset those losses.

St. Charles Parish Hospital CEO Fred Martinez said the hospital would also experience budgetary issues if the inventory tax was eliminated and that the tax burden could greatly increase property taxes for local residents and businesses.

"We would have to (raise property taxes) because when you sell the bond the authority that is responsible for that has to make sure you bring in enough money to service the bonds," he said. "So if (the tax base) drops then you have to pick up the level of millage."

Unlike the hospital, other agencies, such as the Sheriff’s Office, do not have the ability to raise their property tax millage rates and would have to absorb the revenue loss if no other revenue stream was introduced.

Miller said he is afraid that a tax reform package, should it include the elimination of the inventory tax, will have a disproportionately negative effect on parishes with a large industrial presence.

"That includes St. Charles, Plaquemines Parish, St. Bernard Parish, St. John, St. James and Ascension," Miller said. "All of these places have a large reliance on the petrochemical industry."

Miller said although he believes in low taxes, he is not sure that Jindal’s plan will be right for the state.

"I want to have low taxes for everybody, including business. I want to encourage business to locate here, but the problem is if we are just going to eliminate the source of revenue for the parish and for the schools and for the sheriff and for the hospital all in one swoop, it is going to cause a lot of chaos," Miller said.

Sheriff Greg Champagne could not be reached for comment on this story.

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