Louisiana Legislature Advances Tax Bills to Knock Out Huge Budget Deficit

Dozens of revenue raising measures, including a bill that would up the state’s sales tax by 1 cent, and others that call for higher taxes on cigarettes, liquor and car rentals, cleared a committee in the Louisiana Legislature’s House of Representatives on Tuesday.

Unclear, however, is which of the bills will survive once they go before the full House for consideration. Louisiana is facing a budget deficit that Gov. John Bel Edwards’ office has pegged at $940 million for the current fiscal year, and at roughly $2 billion in the next one, which begins July 1. In an attempt to address the yawning budget shortfalls, one of the governor's early moves after he took office in January was to call for the special legislative session that is now underway. The session began just over a week ago on Feb. 14.

Tuesday’s action with the revenue bills took place in the House Committee on Ways and Means. Edwards, a Democrat, welcomed the panel’s decision to let the legislation proceed.

“By moving the debate forward on additional revenue, we’re one step closer to avoiding catastrophic cuts to our higher education system, critical healthcare services, and programs, such as TOPS,” Edwards said in a statement. TOPS is the Taylor Opportunity Program for Students, which affords college and university scholarships to state residents.

The governor added: “I appreciate the committee’s willingness to make these difficult decisions.”

Stressing that discussions had already taken place on the legislation before the committee on Tuesday, its chairman, State Rep. Neil Abramson, a New Orleans Democrat, swiftly led lawmakers through a meeting agenda that included nearly 40 bills.

Rather than whittle down the options the full House would get to consider for generating more revenue, the committee greenlighted all but three of the proposals.

“We don’t know where they’re going, but I took it as a positive sign in that the committee realizes that they need to raise the revenues to deal with these budget challenges. But they didn’t want to go on record as a committee on specific ones,” Jan Moller, director of the Louisiana Budget Project, said by phone on Tuesday. The Louisiana Budget Project tracks and reports on how state policy affects low- to moderate-income families.

“They just kind of sent everything to floor and it’s anybody’s guess at this point which, if any of these, can garner the 70 votes that you need to send them to the Senate,” Moller added.

In Louisiana, levying new taxes, raising existing ones and repealing tax exemptions, requires support from at least two-thirds of the members in each chamber of the state Legislature.

Republicans hold majorities in both the House and the Senate.

With the full House expected to meet later this week, there should be more clarity in the coming days as to which bills might make it to the Senate and, eventually perhaps, the governor’s desk. The Ways and Means Committee passed the bills in such a way that some pieces of legislation will face additional procedural hurdles in the House before they will be eligible for floor votes.

A key bill that moved forward Tuesday calls for a so-called “clean penny” sales tax increase. Under the legislation, an additional 1 percent would be tacked onto an existing 4 percent state sales tax in Louisiana—meaning an extra penny on each dollar spent.

The legislation’s lead author is Rep. Katrina R. Jackson, a Democrat who represents a district that includes the city of Monroe, in the northern part of the state.

Existing Louisiana sales tax law includes a laundry list of exemptions, which cover purchases ranging from racehorses, to supplies used for repairing and renovating offshore oil drilling rigs.

The newly proposed bill is dubbed “clean” because the additional penny of sales tax would apply to many transactions the 4 percent tax does not cover. Carve outs enshrined in the state constitution for groceries, prescription drugs and home utilities would remain in place.

The sales tax hike is among the approaches Edwards has endorsed for stabilizing the state’s budget.

According to estimates from the state’s Legislative Fiscal Office, the added tax would raise $910 million of revenue in the 2016-17 fiscal year. The fiscal office also projects that through the end of the current fiscal year, the tax increase would provide about $220 million.

Some of the other bills that advanced out of the Ways and Means Committee seek to raise more cash for the state by: boosting taxes on cigarettes by 22 cents to $1.08 per pack of 20; jacking up tax rates on liquor, wine and beer by various amounts; reinstating a 3 percent levy on short-term auto rentals; and creating a system to scale back an existing 3 cent sales tax exemption on business utility expenses.

Another package of three bills would pave the way for nixing a state income tax deduction for federal income taxes paid, and to adjust state income tax rates and brackets. One of those bills was sent to the House Civil Law and Procedure Committee.

Of the three bills that did not move ahead on Tuesday, two had to do with corporate income taxes. One of those would have put new limits on net operating loss deductions, the other would have changed so-called apportionment calculations for certain sectors. Such calculations determine how much of a multi-state company’s income is taxable within Louisiana. The third piece of legislation that was held back would have reduced tax discounts for tobacco dealers.

As the Legislature continued its work this week, Moody’s Investors Service on Monday placed eight public universities in Louisiana on review for credit downgrades. In doing so, the ratings agency noted “looming state funding cuts.”

Edwards used the move by Moody’s as an opportunity to reiterate his calls for lawmakers to pass legislation that will increase the amount of money flowing into the state’s coffers. Referring to Louisiana’s universities, he said “with the largest budget deficit in our state’s history, further cuts will be necessary if the legislature will not work with me to bring in additional revenue.”