Louisiana legislators will have an opportunity in 2017 to reform the state’s budget and tax systems, but the odds of it happening are 50-50 at best. The goal of reform is to put an end to the 15 mid-year budget cuts the state has experienced over the last nine years, which have devastated the higher education system.
Three forces have been working since the 2015 gubernatorial election to ensure that Democratic Gov. John Bel Edwards, the surprise winner, won’t chalk up any major successes.
The Gang of No, some 20 hard line House Republicans, began their plotting against Edwards the night before he was sworn into office. Their goal was to make sure he didn’t get the Speaker of the House he wanted, and they succeeded in electing Rep. Taylor Barras, R-New Iberia, a compromise candidate.
The plot is explained in detail by Jeremy Alford and Tyler Bridges in “Long Shot,” the book they wrote about Edwards’ election.
Barras, in return for their support, named Rep. Cameron Henry, R-Metairie, chairman of the powerful House Appropriations Committee. Henry, a disciple of U.S. Sen. David Vitter, whom Edwards soundly defeated in 2015, began immediately to help Republican Attorney General Jeff Landry, another anti-Edwards force.
Landry, the GOP’s choice to oppose Edwards in 2019 — although Landry denies he’s running — has opposed the governor at every turn. So far, he has succeeded even though challenged by Edwards in the courts. The governor is appealing those rulings.
The third force, the state Republican Party, has been burning up the Internet with anti-Edwards news releases. Jason Dore, executive director of the state GOP machinery, was giddy after Republican congressional successes in the Dec. 10 U.S. Senate and House runoffs.
“This is a deep red state,” Dore said. “It was a perfect storm that got him (Edwards) elected, and the results of that are going to be him being unelected in 2019.”
You can see against this backdrop why enacting budget and tax reform is going to be extremely difficult. A task force that came up with its recommendations in November insists that failure to enact most of its suggestions will defeat the goal.
Jim Richardson, a well-known LSU economist and co-chairman of the task force, said, “We recommend implementing this full package as a comprehensive solution to stabilize the state’s finances. A piecemeal approach will fall short of that goal.”
Kimberly Robinson, state revenue secretary and the other task force co-chairman, said, “All voices need to be at the table and be heard. It is a constant discussion. We want every taxpayer to believe that they are being treated fairly.”
The plan being recommended would lower tax rates, broaden items that are subject to sales taxes and reduce the number of state tax breaks. The state sales tax would be lowered to 4 percent from its temporary 5 percent, and cable TV, property repairs and similar services would become subject to the state sales tax.
Taxpayers would be asked to give up their state income tax deduction for federal income taxes in exchange for lower income tax rates. Fifty percent of federal excise itemized deductions would also be eliminated, but mortgage interest and charitable giving would still be deductible.
The recommendations also call for a 10-year phase-out of local inventory taxes and eventual elimination of the corporate franchise tax. Edwards has already started reforming the long-standing 10-year industrial property tax exemption.
The Advocate, in an editorial, summed up the complex problem facing legislators.
“Louisiana can’t get by with just a few hundred million here or there. If the state wants to shed that one penny on every sale, almost a billion dollars must be raised to fill the gap; that means higher income tax collections or a drastic increase in business taxes would be necessary, because the math doesn’t work any other way. Such big changes require thought and precision on the part of lawmakers, not always their strong suit when it comes to the politically charged issue of taxation.”
Some of the proposed changes have already been tried and failed. Voters, for example, on Nov. 8 rejected a lower flat corporate income tax that was revenue neutral in the first year.
Getting voters to give up some of their personal income tax deductions would face a higher hurdle, even though their income taxes would be lower. Legislators refused last year to even submit the idea to voters after the House first approved the idea.
Edwards said of the task force recommendations, “The things they are asking us to do — many are the things that we asked the Legislature to do last year.”
Compounding problems for the Legislature is the Republican Gang of No’s insistence that state spending has to be cut before they will agree to additional taxation. Rep. Lance Harris, R-Alexandria and one of the leaders of the pre-inauguration speaker plot, has complained that the task force should have made more spending cuts.
The task force explained why spending cuts are difficult in its summary of recommendations. Much of what the state spends each year is constitutionally and statutorily dedicated and a substantial portion of the budget comes from federal matching funds that can’t be utilized for anything other than their designated purpose.
The choice legislators face is clear. They need to make the tough decisions necessary for the state to end its constant budget shortfalls. If Republicans put the state ahead of their political ambitions, Louisiana could finally be on a sound financial footing in 2017.
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