More income taxes on the way
Gov. John Bel Edwards seems settled on raising state income taxes in some form or fashion in order to raise enough revenues to avoid cutting some $600 million from the state budget for the 2016-2017 fiscal year.
Since lawmakers can’t raise taxes in a regular legislative session in an even-numbered year, the Legislature most likely will convene a special session immediately following the conclusion of the regular session in early June to tackle the tax hike, or hikes. Lawmakers must have the revenue pieces in place before July 1, or the bare-bones budget the Legislature ultimately approves in the regular session will stand.
If lawmakers don’t go along with the governor on raising taxes a second time this year, or in addition to the sales tax hike the Legislature approved in a special session in February, the budget cuts will hit higher education and students and health care disproportionately. What else is new, you might ask.
The idea that seems to have the best shot at passing the smell test in the conservative-leaning House of Representatives would lead to scaling back the percentage of the amount of money in excess itemized deductions that state income tax filers claim on their federal income tax returns. Examples of these deductions include interest paid on home mortgages and charitable contributions.
As it stands today, Louisianians can claim 100 percent of the value of those itemized deductions on their state income tax returns. Edwards indicated he would like to see the rate rolled back to 57.5 percent, which was the percentage of the itemized deductions state income tax payers could claim until the Legislature raised it to 100 percent a number of years ago.
At the 57.5 percent rate, the state would realize some $150 million in new revenues annually. And according to the Institute for Taxation and Economic Policy in Washington, D.C., Louisiana taxpayers who make at least $103,000 a year would pay some 76 percent of the new tax.
In other words, your typical two-income household would be hit the hardest.
There’s also state Rep. Walt Leger’s idea of juggling the state income tax brackets a bit to push more taxpayers into a higher income tax bracket. The notion is people who earn less would pay more since they would move into a higher tax bracket.
Even a blind man could see why Edwards targeted the popular college scholarship program known as TOPS to move recalcitrant lawmakers toward at least considering raising taxes a second time in a year. After all, the Taylor Opportunity Program for Students largely benefits students from middle class and upper-middle class families. And so the thinking goes that many of the parents of these students vote Republican and are represented by Republicans in the Legislature. If they complain enough, those Republicans will bow to pressure on the home front and eventually will come around to raising taxes to save TOPS as well as trade their votes for something else along the way.
It’s a wise play by Edwards, who, along with lawmakers, certainly must realize that a spike in state income taxes in any fashion will lead to consumers having less money in their pockets to spend in their local economies. Accordingly, fewer dollars spent locally means local governments most likely will see a decline in sales tax collections. And the money burden will pivot to another front.
And certainly Edwards and lawmakers realize, too, that suggesting a hike in the state income tax is justifiable because income tax rates in Louisiana are less than in other states is a woefully weak argument. If the median household income in Louisiana wasn’t some $10,000 less than median household income nationally, Team Edwards might have a leg to stand on. It doesn’t because the fact of the matter is Louisianians, by and large, make less money than our friends and neighbors in just about every state in the Union but already pay some of the highest sales taxes in the nation.
Still, higher state income taxes are on the horizon because at the end of the day, this Legislature will buckle and the governor will get his way.
Sam Hanna is a state political writer.