Frances Gould, McClure, Olivia J. | 10/14/2016 5:36:06 PM
Louisiana farmers will have to pay two new taxes put in place by the state Legislature in an effort to fill a budget shortfall.
One measure imposed a 5-percent tax on poly pipe, which previously was not taxed, for the 2015-2016 fiscal year, which ended June 30. The rate decreased to 3 percent on July 1, the first day of the new fiscal year, and will remain at that level until June 2018.
The other new tax is a 1-percent tax on the sale of off-road diesel fuel, which was tax-exempt in the past. It also is in effect through June 2018.
These new expenses could hurt some farmers, who are already struggling to stay afloat amid rising input costs and unfavorable commodity prices, said Naveen Adusumilli, an LSU AgCenter economist.
“When all these variables act at one time, those costs increase quite a bit,” he said.
The taxes were passed in the first of two special sessions held this year in addition to the regular legislative session. Legislators have agreed to revisit the taxes later and consider reducing the rates, Adusumilli said.
In the meantime, producers of water-intensive crops such as corn and soybeans will face steeper irrigation costs. The poly pipe tax alone will increase production costs by about 50 cents per acre, Adusumilli said.
About 1.1 million acres of cropland is irrigated in Louisiana, he said. The vast majority of Louisiana farmers who irrigate — 80 percent — use poly pipe.
The impact of the new off-road diesel tax is not yet clear.
Together, the two taxes could decrease overall net returns for soybean and corn production, Adusumilli said. Those commodities contribute significantly to the state’s gross domestic product, he said, so raising the cost to grow those crops could harm the state’s economy.
It’s also possible that some of the money the state intended to raise with the poly pipe tax will never be collected. Some farmers live close to borders with neighboring states, where they can buy poly pipe without being taxed, Adusumilli said.
“The unintended consequence is that not all the money is coming to the state,” he said. “It’s going somewhere else.”
Adusumilli is studying what kind of impact the taxes may have in a market already dealing with high production costs and poor commodity prices.
“Any slight increases in the taxes will affect what farmers make,” he said. Olivia McClure