By DAN JUNEAU

Louisiana may never have a more powerful member of Congress than former Senator Russell B. Long.

For years he chaired the powerful Senate Finance Committee and had more say so over tax law than anyone in the nation. Long authored many tax changes in his glory years, and he learned more than anyone how taxation policy influences the economy, for better or worse.

Since returning to Louisiana from Washington, Long has led a rather quiet life in retirement. However, he recently sent a letter to the members of the Louisiana Legislature about the subject of taxation, specifically about legislation designed to end the practice of taxing the debt of businesses in our state.

“Over 60 years ago,” his letter noted, “my father, Huey P. Long, placed the franchise tax on the books.

“It might have been needed then, but today I think it is time to remove it, particularly on corporate debt. We should do this to make our state more competitive for new jobs and new businesses. Simply put, taxing one’s debt is bad economic, investment, and tax policy.”

Simply put is right! Louisiana is the only state that taxes corporate debt (except for Oklahoma which caps the tax at $20,000). There are strong arguments that can be made for taxing profits and sales, but to tax debt makes no sense, as the senator said, from the standpoint of economics, economic development or tax policy.

The purpose of Long’s letter was to ask legislators to support a bill before them designed to phase out the debt portion of the corporate franchise tax over a period of years.

There is much support in the Legislature for ending the silly notion of taxing a business’s debt, but there is opposition as well.

Opponents will try to use age-old class warfare arguments to kill the attempt to get rid of this dinosaur in our tax code and remove one of the major impediments to new investment in Louisiana. Reducing the franchise tax by eliminating debt from its base will result in tax breaks for “Big Business,” they argue.

It is true that 53 corporations in Louisiana pay 38 percent of the total franchise tax.

In other states, these companies would pay little, if any, franchise taxes. I think Long would suggest that one of the reasons Louisiana does not have more of a corporate presence is due to this anachronism of making companies pay a tax on their debt.

Opponents to the legislation are ignoring some important facts when they attempt to attack the bill on “Big Business” grounds. Of the 65,000 viable businesses paying above-the-minimum corporate franchise tax in Louisiana, a total of 64,146 pay $50,000 or less in annual franchise taxes.

That means thousands of small-to-medium-sized businesses must pay a tax on the money they borrow to operate their businesses.

While larger corporations may pay a proportionately higher share of the tax, the penalty of paying a tax on borrowed money is just as unfair to smaller companies as it is to larger ones.

Almost every start-up company will incur debt. Money borrowed for land, facilities, machinery and equipment can add up quickly.

The tax on debt is a severe disadvantage to a new company, particularly when our competitor states in the South do not levy this tax. The Louisiana Legislature would do well to heed the wise words of one of the leading architects of tax policy that this nation has ever produced.

Taxing debt is wrong – period! The sooner the debt portion of the franchise tax is removed, the sooner Louisiana will be viewed in economic development circles as a state that understands that taxing borrowed money discourages investment and job creation.

When that day comes, businesses large and small will view investment much more favorably in the Bayou State.

DAN JUNEAU is the president of the Louisiana Association of Business and Industry.