The sweeping $1.5 trillion federal tax overhaul may turn out to be a desperately-needed gift for Louisiana's state budget at a critical time.
It's a unique perk for the state – though it will mean higher state tax bills for individuals, and officials still are unclear how much money the state can expect from it.
The tax overhaul, championed by Congressional Republicans and President Donald Trump, lowers federal taxes for many.
Currently, Louisiana is one of just three states that allow individuals and some businesses to deduct 100 percent of their federal incomes taxes from the amount that they pay in state taxes. Smaller federal tax bills will mean smaller state deductions. That puts more money in the state's coffers.
"If you pay less taxes, then the deduction gets smaller," Gov. John Bel Edwards, a Democrat, said during a recent news conference.
Edwards' office and the state Department of Revenue said that they are still crunching the numbers on the federal deductibility issue and just how much it will chip away at the the looming $1 billion-plus shortfall the state faces when temporary tax measures expire on June 30.
The federal deductibility is Louisiana's largest income tax break and cost the state nearly $1.1 billion in 2016. The deductions will still be available to Louisiana residents, but the amount the state has to cover will be smaller if people pay less in federal taxes.
"Obviously, that could help us resolve a portion of the cliff," Edwards said.
A task force that was formed to come up with recommendations for shoring up the state budget recommended that Louisiana eliminate or scale back the deduction, but lawmakers haven't embraced the proposal, along with others from the blue ribbon panel. In addition to the three states that allow entire deductions, three others have similar deductions that are capped.
The fiscal cliff has been the subject of ongoing battles between Edwards and the GOP-controlled state Legislature, namely House Republican leaders.
Edwards has said he will decide by Jan. 19 whether there is enough movement toward reaching a solution to call a special session in February. Lawmakers cannot take up most revenue measures during the regular session that starts in March because those issues are limited to odd-numbered years. Lawmakers didn't reach an agreement on proposals put forth last year, prompting the need for a special session.
"I don't want to call a special session just for the sake of calling it," Edwards said.
So far, no agreement has been reached and lawmakers have offered mixed views on how optimistic they are about negotiations.
Edwards is expected to meet with House Speaker Taylor Barras, R-New Iberia, again on Monday to continue discussions. Privately, House Republicans, who have been the biggest roadblock to Edwards' agenda have been having their own meetings. They want more cuts or structural changes to the budget and have opposed more sweeping tax changes to increase revenues.
Some legislators have floated the idea of extending the temporary sales tax hike that will expire in June, which Edwards says he doesn't support as a long-term measure. But he has indicated that, depending on the timeline of the federal tax changes taking effect, he might support a temporary extension.
"Once we can figure out if there is additional revenue that we will receive and when that will take place, then I can agree to extend some portion of the penny until that actually happens," he said. "(The federal rewrite) is the most significant tax change legislation in three decades, and it is not at all clear how it will impact the state of Louisiana, but we will learn more over time."
Michael Acaldo, the president and CEO of the Society of St. Vincent de Paul in Baton Rouge, …