Business interests flexed their political muscle Tuesday before the House tax panel, which readily approved tax breaks for corporations while killing a measure that could have reduced taxes for 90 percent of Louisiana households.
The House Ways and Means Committee also rejected a measure that would have raised taxes on business as a way of helping address the state’s looming budget gap.
With its votes, the Republican-controlled committee left Gov. John Bel Edwards’ tax plan in tatters, turned a cold shoulder to key recommendations from a blue-ribbon commission that studied the tax code last year and left two Republican lawmakers fuming at their colleagues for torpedoing bills that they said would have reformed the tax code.
One of the legislators was state Rep. Kenny Havard, R-St. Francisville, who sponsored House Bill 648, which would have replaced the corporate franchise and income taxes with a hybrid tax that would have cost businesses $230 million more per year. The major business lobbies opposed HB648.
Just before the committee rejected it on an 11-2 vote, Havard let loose in an extraordinary way against the business lobbyists in the committee room.
“If we don’t have the courage to do it now,” Havard said, “for God’s sakes, [because] we might upset some of the people sitting behind us? ... Let’s just keep what we’ve been doing for the past 20 years. Isn’t that the definition of insanity? Keep doing the same thing over and over and expecting different results? We’re not going to get different results. The only mistake I made was thinking you could make change ... The whole system is set up against change.”
The sway of business interests in the State Capitol is considerable. Besides making campaign contributions to favored candidates, business lobbyists host nightly receptions attended by legislators, pay for “committee dinners,” where they take an entire legislative committee to an expensive restaurant and pay for platters of food delivered when lawmakers meet through the lunch break.
Tuesday’s committee votes also left unanswered a key question at the regular session’s midway point: How do House Republican leaders propose to head off next year’s fiscal cliff when $1.3 billion in temporary taxes will expire?
Also unclear is whether the committee will send any more revenue bills to the House when it reconvenes next week, with time beginning to get short before the 60-day session ends on June 8.
On Monday, Ways and Means sent several measures to the full House for consideration that would raise revenue next year but not enough money, with the House-approved version of the budget generating enough savings to close only about half of the fiscal cliff, according to its leaders.
On Tuesday, the committee approved a more generous tax break for construction projects that the legislative staff estimated could cost tens of millions of dollars. The committee approved House Bill 264, by state Rep. Stuart Bishop, R-Lafayette, without objection.
The committee then approved House Bill 444 at the behest of business interests and several local government groups that would allow businesses to pay for infrastructure projects upfront in lieu of property taxes. HB444, by state Rep. Alan Seabaugh, R-Shreveport, also won approval without a recorded vote.
Seabaugh said the measure would encourage more investment.
Anne Dunn, representing Together Louisiana, a statewide nonprofit, said HB444 would lead local leaders to make short-term decisions to get the upfront payments at the expense of larger property tax payments over time.
The committee approved yet another bill sought by business. House Bill 180 by state Rep. Thomas Carmody, R-Shreveport, would take away the governor’s power to decide whether businesses would win exemptions from local property taxes.
Matthew Block, the executive counsel to Gov. John Bel Edwards, told the committee in vain that the governor has already made the needed changes to the tax break, known as an industrial tax exemption.
In an interview afterward, Block said Carmody’s bill would reestablish two five-year tax exemptions for business, compared to the governor’s plan establishing one five-year exemption at 100 percent and three more years at 80 percent of the exemption.
The governor had no better luck on House Bill 284, sponsored by state Rep. Rob Shadoin, R-Ruston. HB284 would have given voters the chance to lower individual income and corporate tax rates in exchange for losing a deduction they get by deducting their federal tax payments on their state tax returns.
In all, 90 percent of households would have gotten a tax cut under the measure – $124 for a household that has federal adjusted gross income of $50,000 per year, $201 for a household that earns less than $50,000 – according to the governor’s office. A household that earns at least $1 million per year would have seen its tax bill rise from $84,378 per year to $107,739, a $23,361 increase.
Jim Richardson, an LSU economics professor, testified that the changes sought by Shadoin were virtual duplicates of recommendations by the task force that spent 2016 studying the tax code. Richardson co-chaired the task force.
Overall, the proposal, had it been approved by the Legislature and then voters, would have cut individual income taxes by $43 million a year while raising business taxes by $66 million a year.
State Rep. Jay Morris, R-Monroe, questioned the bill because it would make the state’s tax system more progressive.
Louisiana’s tax system currently is regressive, meaning that the poor pay a higher percentage of their income in taxes than the wealthy, according to the Institute on Taxation and Economic Policy, a Washington, D.C.-based group that works with the Louisiana Budget Project. Families that earned $17,000 or less in 2015 paid 10 percent of their income, the group found, while families that earned at least $470,000 paid only 4.2 percent.
State Rep. Barry Ivey, R-Central, said he preferred his tax package to Shadoin’s bill because his would make wholesale changes to the tax system.
Ways and Means defeated the measure, 11-7.
Voting against the Shadoin bill were: Seabaugh; Ivey; Morris; state Rep. Jim Morris, R-Oil City; Rep. Dodie Horton, R-Haughton; Rep. Paula Davis, R-Baton Rouge; Rep. Clay Schexnayder, R-Gonzalez; Rep. Phillip DeVillier, R-Eunice; Rep. Stephen Dwight, R-Lake Charles; Rep. Mike Huval, R-Breaux Bridge; and Rep. Julie Stokes, R-Kenner.
Voting for the bill were: state Rep. Chris Broadwater, R-Hammond; Rep. Joseph Bouie, D-New Orleans; Rep. Jimmy Harris, D-New Orleans; Rep. Robert Johnson, D-Marksville; Rep. Marcus Hunter, D-Monroe; Rep. Ted James, D-Baton Rouge; and Rep. Major Thibaut, D-New Roads.
“It is disappointing that a small group of members on the House Ways and Means Committee would block a tax cut for 90 percent of individual tax filers in Louisiana, but refused to ask the 80 percent of corporations that pay absolutely nothing in state income taxes to pay their fair share,” Edwards said in a statement afterward.
Shadoin, who has frequently joined bipartisan coalitions supporting the governor’s legislation, also expressed dismay after the vote.
“I’m not sure what we’re doing here,” Shadoin said in an interview. “Today’s message to me is that we can kiss tax reform and budgeting reform goodbye for this session. We all knew coming into this session what we needed to do – restructure the broken tax system.”
Horton, asked about her vote against Shadoin’s measure, said she had to rush off to meet with another legislator. Davis also said she couldn’t talk to meet with another legislator.