When the budget is unveiled Friday, some Republican lawmakers say they’re going to be looking at tax exemptions and credits, which Gov. Bobby Jindal repeatedly has declared off-limits, to see if any adjustments can be made that would raise revenue to help fill a $1.6 billion deficit between the cost of state services and the amount of revenues available.
The spending plan for the budget year that begins July 1 will be presented to the Joint Legislative Committee on the Budget on Friday morning by Jindal’s budget architect, Commissioner of Administration Kristy Nichols.
The proposal is expected to include reductions in state spending on higher education of about $200 million; another $290 million will be cut from health care services and about $100 million from general government operating costs.
But Nichols also told The Associated Press that Jindal wants to rework 12 “refundable” tax credits, from which she expects to raise about $526 million. The credits are deemed “refundable” when the state pays out more than the actual taxes a person or business owes, leaving the state to write the taxpayer a check for the difference. Under the plan the state would keep that money.
“It’s a big step in the right direction and certainly encouraging that the administration is softening its stance,” said state Rep. Tim Burns, R-Mandeville. “But we need a wider conversation on tax credits and exemptions.”
Under Jindal, tax credits, exemptions and other breaks for business have mushroomed. A handful of the giveaway programs, mostly incentives to increase business activities, examined by The Advocate in a recent series found that their cost had shot up from just over $200 million a year to $1.1 billion during the past decade.
But the revenues have not rebounded as predicted and state government probably can’t sustain another round of deep cuts, Burns said.
“I come from a starve-the-beast district. At some point, you can’t kill the beast. We need health care; we need the schools,” Burns said. “Sometimes there are appropriate ways and appropriate times to raise revenues.”
Burns is not talking about raising taxes; he is talking about reviewing each exemption and credit. That’s activity that Burns says some would view as being for tax increases, which is the political death knell for a Republican, particularly one from the north shore. It’s not, he said.
The governor, who is flirting with a run for president, has rejected any revenue increase in Louisiana that has been seen as a tax increase by national groups.
The administration has been in a contact with Americans for Tax Reform, the group headed by Grover Norquist that had some state legislators sign a pledge not to increase taxes. Jindal’s press office acknowledges that the administration has been in contact with Americans for Tax Reform.
Two years ago, Jindal blocked a renewal of a four-cent per pack tax on cigarettes. Legislators attached the tax to a constitutional amendment, which Jindal couldn’t veto, so now the renewal is in the state constitution.
Jindal defines a tax increase as any hike in tax rates or reduction in credits, or deductions not offset by a corresponding tax cut.
“I don’t know the verbiage that is politically correct,” said Republican state Sen. Fred Mills, from his Breaux Bridge office at the Farmers Merchants Bank & Trust, where he is president and chief executive officer.
Some of the tax incentives have not produced as promised.
“It looks like we can have a huge discussion on how we can cut hospitals,” Mills said. “But when you’re ready to have the discussion on the exemption and tax credit side and whether we really got a return on investment, that seems to be a taboo discussion.”
“We need to be taking a serious look on the revenue side. I don’t think we need new taxes in the state of Louisiana,” said state Sen. Jack Donahue, the Mandeville Republican who chairs the Senate Finance committee.
“If you’re talking about raising taxes, that won’t come out of the Legislature,” Donahue said.
Rep. Ledricka Johnson Thierry, D-Opelousas, said Democrats have been engaged in conversations with Republican members in recent weeks. “They are willing to possibly consider a form of suspending or rolling back some of those tax breaks,” she said.
Lafayette Republican state Rep. Joel Robideaux, who chairs the tax-writing House Ways & Means Committee, says he’s intrigued by the governor’s willingness to entertain cuts to tax credit programs; but he thinks it would be unfair to essentially change the rules in the middle of the game for people who have invested already. (For instance, if someone bought a solar power-generating system or made a film based on the existing rules, it would be unfair to deny them their credits).
“I would be surprised if the Legislature changes the rules on anyone midstream,” Robideaux said.