The House Ways and Means Committee on Monday passed the first tax increase approved by an arm of the state Legislature this year, a 32-cents per pack hike in Louisiana’s tobacco tax.
But the more important story may be the committee’s turning aside of a proposal to raise the tobacco tax by more than three times as much.
Monday’s votes represented the first test of legislators’ willingness to raise taxes in an election year to balance the budget, a test they failed, according to state Rep. Harold Ritchie, D-Bogalusa, who is sponsoring the anti-tobacco legislation.
“I think it’s going to be tough to put a deal together to get out of this (budget) mess,” Ritchie said after the vote. “We’re not even close.”
The tobacco tax increase goes to the House floor.
Measures that would raise taxes or fees have a high bar, ultimately requiring a two-thirds vote in each chamber.
On Monday night, the House committee did pass several bills that would trim or end several tax breaks. None of the measures — which also go to the House floor — would raise much more money for next year, however.
Legislators are under enormous financial pressure to raise taxes to plug a projected $1.6 billion budget shortfall for the fiscal year that begins on July 1. Republicans and Democrats alike have said the Legislature cannot balance the budget simply by cutting spending because that would mean the closure of college campuses and public hospitals.
Raising tobacco taxes by 32 cents, to 68 cents per pack, would raise $67 million per year, the legislative staff estimates.
Ritchie’s House Bill 119 sought to increase the levy by $1.18 per pack to raise $240 million per year. But the committee didn’t have the stomach for such a big increase and instead amended his bill to limit the increase to 32 cents.
Convenience store owners spoke against raising tobacco taxes, saying doing so would cost jobs, while anti-tobacco advocates said it would save lives and reduce tobacco-related health care costs that add up to $2 billion per year in Louisiana.
“Raising the tobacco tax reduces tobacco consumption,” said B. Jay Brooks Jr., a cancer doctor at Ochsner Health Center in Baton Rouge. Anti-tobacco advocates said the $1.18 increase would keep 34,600 Louisiana children from becoming smokers.
The state’s current rate of 36 cents per pack is the third lowest in the country. At 68 cents per pack, Louisiana would match Mississippi in having the 37th lowest rate.
State Rep. Joel Robideaux, R-Lafayette, the Ways and Means chairman, agreed with Ritchie that raising the money needed to balance the budget will be difficult but pointed instead to two votes on the House floor last week as important barometers of the challenge.
In one vote, the House failed to approve a measure, House Bill 773, that sought to impose a fee of up to $250 on companies that apply for incentive programs from Louisiana Economic Development.
In another vote, the House failed to approve a $100 fee on businesses to provide more funding for the state agency that regulates financial institutions, even though the agency operates at a deficit and businesses supported the increase.
“I think members thought they were taxing consumers,” said state Rep. Erich Ponti, R-Baton Rouge, who sponsored the measure, House Bill 315. “Certain members are very sensitive to that.”
During his committee hearing, Robideaux spoke to the challenge that legislators face this year in balancing the budget, which is required by the state Constitution.
“Our constituents sent us here to represent them,” Robideaux said. “Making difficult and unpopular decisions is included in that representation. Whether we are term-limited, running for re-election, running for some other office or running for president of the United States, our job is to do what is best for the people of Louisiana. Nothing else matters.”
It was Robideaux who sponsored the amendment to limit the tobacco tax increase to 32 cents. He said he made the move, which was approved without dissent, after counting heads and concluding that the full $1.18 would not win approval.
The amended bill passed 11-5.
State Rep. Chris Hazel, R-Pineville, explained afterward why he cast one of the no votes.
“I’ve never voted for a tax,” Hazel said. Asked how the Legislature can balance the budget without tax increases, he said, “That’s a great question.” He added, “This is a work in progress. The bill’s moving forward.”
Meanwhile, the Ways and Means Committee also approved two measures —House Bill 817 and 779 — that would scale back tax credits for the installation of solar energy systems and another one — House Bill 510 — that would eliminate the tax credits entirely as of July 1.
State Rep. Ted James, D-Baton Rouge, the sponsor of HB510, said ending the solar tax credits would save the state about $16 million next year and double the following year, money that would be better spent on the state’s colleges and universities and public health system.
Two other measures approved by the committee — House Bills 383 and 218 — would eliminate a tax code provision that allows companies which report a loss to seek refunds by offsetting the loss against the previous three years of taxes paid.
Another measure — House Bill 466 — would trim the state’s enterprise zone credit that is aimed at encouraging investment in blighted areas but is widely criticized as ineffective.
Ways and Means is scheduled to hear more tax bills on Tuesday, including House Bill 276, which would phase out the tax credit that covers 30 percent of the costs to film movies and television shows in Louisiana. The program cost the state $223 million last year.