Edwards' CAT finally out of the bag: the governor and the proposed 'commercial activity tax'


Gov. John Bel Edwards.
  • Gov. John Bel Edwards.

A lot has already been said about Gov. John Bel Edwards’ proposed “commercial activity tax,” or CAT, but the early rumblings against it are nothing compared to what’s to come. The governor undoubtedly knows that, which explains why he quickly promised to find ways to reduce the tax’s adverse impact on low-margin businesses.

Edwards presented his new tax last week as part of a “budget stabilization plan” that he hopes lawmakers will adopt in the annual session that begins next Monday, April 10. This year’s session, like others in odd-numbered years, will focus heavily though not exclusively on fiscal matters. Because the “temporary” sales tax increase adopted last year expires in 2018 — a “non-fiscal” year for legislative sessions — this year’s session presents an opportunity for Edwards and lawmakers to adopt long-term fiscal reform.

The chances of that happening appear to be even slimmer than the likelihood of the Republican-controlled (and very partisan) House of Representatives embracing Edwards’ newfangled CAT, which is actually a gross receipts tax — that is, a tax on businesses’ gross earnings. Even companies that lose money would pay an income tax on their gross receipts.

Only four other states levy such a tax, which is just one of the reasons it faces long odds of passage in its present form.

The governor’s GOP detractors will doubtless cast his CAT proposal as an ill-conceived, hastily confected idea. There’s no question that he unveiled it without giving the public or lawmakers much time to consider all its ramifications, but it would be unfair to say he hasn’t made it part of a larger plan to overhaul Louisiana’s much-maligned tax code. CAT is grabbing headlines because it’s new, but other items in the governor’s overall revenue scheme are part of what fiscal reformers have advocated for decades.

That said, the governor’s Republican foes make a valid point when they say that true fiscal reform means changing the way Louisiana spends money as well as how the state raises it. While Edwards has focused on the revenue side of the coin, the House GOP leadership remains fixated on cuts — after years of draconian cuts under Gov. Bobby Jindal and without offering a comprehensive spending reduction plan of their own since Edwards took office.
Interestingly, a recent survey report by LSU pollster Mike Henderson found that voters prefer a combination of higher taxes and spending cuts. Voters do not support cutting higher education, health care or infrastructure improvements. In fact, they want more spent on those items.

The survey was conducted by LSU’s Reilly Center for Media and Public Affairs in the university’s Manship School of Mass Communication. It shows that voters get the big picture. So why don’t our elected leaders?

Few people find humor in a debate over budgets and taxes, but the governor’s decision to call his gross receipts tax “CAT” will at least give rise to a chorus of puns. Here’s mine: Now that Edwards’ CAT is finally out of the bag, a lot of folks are looking for ways to spay it.

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