Increased sales taxes could worsen Louisiana's already high insurance premiums

Increased sales taxes could worsen Louisiana's already high insurance premiums.

To make up lost revenue from the proposed income tax cut, the Legislature is proposing to expand the list of sales and use taxes on a wide variety of services.

In total, 41 additional services will be added to Louisiana's list of taxed services.

The new taxable categories include services provided by "accommodations intermediaries," meaning any person or entity facilitating the rental of accommodations like condos, townhouses, or rental houses.

"Capital improvements" such as new construction, remodeling, and major installations (e.g., HVAC systems, driveways, and roofs) on immovable property will also be exempt, excluding minor repairs or individual replacements.

Amendments were added to the bill to include repairs claimed during declared emergencies such as hurricanes or other natural disasters.

This provision had committee members worried that it may still inflate insurance premiums, since not every insurance claim for a fallen tree is not made in the context of a declared emergency.

If the repair is deemed as a "capital improvement", it would be exempt, but begs the question what exactly is considered a capital improvement.

"Clarity and predictability is key to the insurance market. When you take that away, it generally does not favor the consumer," said Rodney Braxton, an insurance representative from Southern Strategies.

Further, adding sales taxes would effectively tax certain types of labor if the repairs or maintenance fall outside of a capital improvement, meaning insurance companies could take on the burden of these costs leading to potentially higher premiums.

Through House Bill 9, legislators aim to broaden Louisiana's tax base to generate additional state revenue.

"We looked for states close to us like Texas, North Carolina, Kentucky. And then we looked at them, where do they overlap, what are laws and the common areas we have to deal with and then picked that list," said Richard Nelson, secretary of the Department of Revenue.

Rep. Neil Riser, R-Columbia, who authored the bill and the committee spent a lot of time on the specifics of the bill and what exactly is capable of being taxed and what is exempt from tax.

House Bill 9 was not saved from Rep. Mandie Landry's, D-New Orleans, staunch criticism of the tax reform package.

"These are new taxes. We are now raising taxes," Landry said. "We're just moving things around. I just think this hearing is an example of us not understanding much of what's going on"

"This seems like it's taxing the little guy instead of big companies." Landry continued.

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