The state House first eviscerated and then killed the first major revenue-raising bill during the legislative session on Tuesday.
The vote fanned concerns that the conservative Republican-controlled House will not offer a solution to the huge budget deficit the state is facing next year.
“I don’t know,” state Rep. Gene Reynolds, the Democrats’ caucus leader, said when asked immediately after the vote how the Legislature would solve the budget problem. “Special session, I guess.”
Virtually all Democrats, including Reynolds, voted against the sales tax measure before them Tuesday, House Bill 609, sponsored by state Rep. Jay Morris, R-Monroe. Reynolds said the Democrats want the House to approve instead a similar measure, House Bill 411, offered by state Rep. Ted James, D-Baton Rouge, on Wednesday.
Both bills would renew legislation approved in 2016 that temporarily eliminated tax exemptions on some 120 different sales tax transactions on two cents of the five-cent state sales tax. (The combined local-state sales tax averages 10 cents, the highest in the country.)
The Legislature has slightly over three weeks to settle on a solution to the $1.3 billion funding gap, or face being called into a special session by Gov. John Bel Edwards, perhaps immediately after the June 8 regular session adjournment or perhaps weeks or months later. The House Ways and Means panel has killed Edwards' proposals for addressing the budget gap.
State Rep. Julie Emerson, R-Carencro, said she voted against Morris’ bill because lawmakers had approved it as a temporary measure only.
“People complain that we don’t live up to our promises,” Emerson said in an interview. “This legislation was trying to go back on that.”
Following the vote, the House is about $650 million to $700 million short of filling the shortfall after approving a version of the budget that clamps down on state spending by appropriating only 97.5 percent of the money next year that the state will spend during the current year.
Morris is a maverick among Republicans because of his willingness to eliminate tax subsidies favored by business.
As originally proposed, Morris’ legislation would have raised $173 million toward the $1.3 billion funding shortfall to be caused when temporary taxes will expire.
But after Jay Morris presented his opening argument for the bill, state Rep. Jim Morris, R-Oil City, offered an amendment that would exempt energy in the production for natural resources from the two cents of sales tax. Jim Morris said he was trying to help an industry that was hurting.
“The more we give favoritism to one, the greater the burden to the rest,” Jay Morris told his colleagues as he asked them to oppose the amendment. “We’re still short $700 million.”
They ignored his request, approving the amendment, 72-24. In an interview after the vote, Jim Morris said he didn’t know how much it would cost Jay Morris’ bill.
State Rep. Mike Danahay, D-Lake Charles, then offered a second amendment. Pushed by the Louisiana Association of Business & Industry, it would exempt manufacturing businesses from sales taxes on their utilities. Danahay said businesses needed the tax break.
Jay Morris returned to the microphone to repeat his previous plea to his colleagues.
“Every time we grant another exemption, we increase the burden on those left to pay,” Morris said, noting that Danahay’s amendment would eliminate at least $100 million from the $173 million that HB609 originally would raise. “It’s arguably gutting the bill … It’s easy to say let’s do whatever the special interests want us to do. We’re going to have to face the music one day.”
Morris’ colleagues ignored him again, approving the amendment, 73-20.
Business interests flexed their political muscle Tuesday before the House tax panel, which r…
The Tax Foundation, a Washington, D.C.-based nonprofit, has ranked Louisiana as having the worst sales tax system in the country in part because of Morris’ 2016 legislation, which left tax exemptions in place for some pennies of the five-cent sales tax and not others.
State Rep. Julie Stokes, R-Kenner, picked up on that theme. “This is really bad tax policy,” Stokes told the House.
Morris made his final argument for a bill that was now a shadow of its earlier self.
“You can call this bad legislation,” he said. “I ask you to take this tiny step for doing what we know we have to do next year.”
Only 20 legislators voted for his bill, 81 opposed. It needed at least 70 votes, a super-majority in the 105-member House.
Reynolds, afterward, said the chances for James’ similar bill getting 70-plus votes “were probably not good.”
The House took up another major tax bill on Tuesday. House Bill 355 by state Rep. Barry Ivey, R-Central, would rewrite the state’s tax system by establishing flat individual and corporate tax rates, eliminating some tax exemptions and providing a greater tax break for the working poor. It faced long odds for passage, also needing 70 votes.
State Rep. Alan Seabaugh, R-Shreveport, zeroed in on the absence of a fiscal note on Ivey’s bill.
“You’re asking for us to vote for a comprehensive bill … and you can’t tell us whether it’s a billion dollar tax increase or a billion dollar tax cut or something in between,” Seabaugh said. “That’s a problem for me.”
Minutes later, Ivey withdrew his bill, saying he would return another day, after he got a better handle on its fiscal impact.
The article originally misidentified the tax break in the amendment offered by Rep. Danahay. It would exempt manufacturing businesses from sales tax levied on their utilities, not exempt businesses from two cents of sales tax for the equipment and machinery they purchase for manufacturing.