Penny here..penny there..everywhere there’s a penny
As the special legislative session headed toward sine die earlier this week, one thing was crystal clear.
That is the business community, particularly the oil and gas industry, has a firm grip on the state Legislature and few lawmakers dare risk political suicide by taking them on. Signs of the business community’s influence were on display on all fronts throughout the session, evidenced by the presence of lobbyists representing the state’s largest employers as well as the absence of any discussion about a particular tax proposal that could possibly solve the state’s financial problems overnight. We’ll get to that in a moment.
Gov. John Bel Edwards unveiled an ambitious agenda for lawmakers to entertain to erase deficit spending in the fiscal year that will come to a close on June 30 as well as gin up enough revenues for the new fiscal year beginning July 1, all to avoid a financial meltdown, according to Edwards, of plutonic proportions. On the table, specifically, were a roughly $900-million deficit in the current fiscal year and a projected deficit of more than $2 billion heading into the 2016-2017 fiscal year.
Edwards’ wish list was a long one including a hike in the state sales tax and some tinkering with the personal income tax code. Abolishing some of the tax credits and other goodies the business community has enjoyed for years was put on the table, too, but their fate was sealed long before the new governor delivered his speech to rally the troops at the opening of the session.
As Tuesday morning turned to Tuesday afternoon the last week of the special session, it appeared lawmakers would eventually agree on a compromise to add a penny to the state sales tax — raising it from four to five cents — but the life of the new tax was in limbo. The House approved it for 18 months; the Senate wanted five years. A conference committee comprised of members of the House and Senate were scheduled to work out the details.
Along the away, lawmakers hiked taxes on alcohol and tobacco, better known as sin taxes, but coupled with the new penny sales tax, the Legislature was still short of money to erase the $900-million hole in the budget for the fiscal year that ends in just three and a half months.
While a proposal here and a proposal there to locate more money to close out the current budget fell by the wayside, attention turned to Rep. Jay Morris, a Republican from Monroe. Specifically, Morris’ bill to remove all exemptions from one penny of the state’s existing four-cent sales tax came into play. The House approved it by a wide margin once an amendment was attached to the bill for the suspension of the exemptions to run just three years.
That all changed Tuesday morning when the Senate Revenue and Fiscal Affairs Committee amended Morris’ bill to remove every exemption on all four pennies of the existing state sales tax. The committee threw Morris a bone, though, and left the three-year sunset intact. So much for favors.
Morris’ bill represented the last shot lawmakers had to generate the money needed to balance the budget. The alternative was more cuts in state spending, which would mean higher education and health care would take another hit. LSU warned it could not meet the payroll at the medical center in Shreveport if the LSU system was forced to take another cut in state appropriations.
While even big business, including the oil and gas industry, would be forced to pay more if the exemptions on at least one of the state’s four-cent sales tax disappeared, that’s a far cry from what could occur if lawmakers, led by a strong governor, moved on an oil and gas processing tax. Edwards thought about it but passed on it. Even the lure of the state landing $2 billion to $4 billion annually in new revenues, paid almost exclusively by consumers outside of Louisiana, wasn’t attractive enough to motivate
Edwards to take on the oil and gas lobby. They’re a tough, well-financed bunch.
Perhaps the average working man and working woman in Louisiana would be interested in a processing tax if abolishing state income taxes was part of the deal. Perhaps, but that’s neither here nor there for now.
What’s here is a patch job on the state budget that will buy Edwards and the Legislature some time. That’s a good thing since the regular legislative session began on Monday March 14th.
Whether they realize it or not, lawmakers most likely will meet again in another special session. Tax reform will be the hot topic. Undedicating statutorily dedicated appropriations should be, too.
And hopefully someone will come up with a better way to finance state government without taxing us to death.
Sam Hanna is a state political writer.