On Day One of the effort to raise more money to plug a massive budget deficit, state legislators learned Monday that the job will be tougher than they had imagined.
State Sen. Robert Adley, R-Benton, had to defer consideration Monday of a bill that would repeal the state’s business inventory tax, a measure that is the centerpiece of legislative plans to raise hundreds of millions of dollars of new tax revenue.
Adley cited uncertainty after legislative staff determined that Senate Bill 85 would actually generate no extra money next year and as a result provide no help to filling the $1.6 billion projected budget gap. Adley made the move before the Senate Revenue and Fiscal Affairs Committee, which had made his legislation the first tax bill to be heard this year because its fate would determine how they would handle future revenue-raising proposals.
It’s not clear Adley had the votes.
In the closing moments of Monday’s Senate session, with practically nobody paying attention, a similar measure, Senate Bill 177, was moved to the Senate Finance Committee, where it’s expected to have a friendlier hearing.
Adley’s decision to defer SB 85 in turn caused the chairman of the House tax-writing committee — called Ways and Means — to drop plans to hear a slew of revenue-raising measures on Tuesday.
“We’ll regroup with senators to make sure we’re on the same page as it relates to finding a solution to the budget deficit,” said state Rep. Joel Robideaux, R-Lafayette, the Ways and Means chairman. “I’m sure those discussions will start this evening. I’ll be going home a little later than normal.”
A related problem cropped up Monday: Legislative staff determined that the tax bills to be heard by Robideaux’s committee would raise less money than expected.
“We’re trying to get a handle on it,” Robideaux said of that problem.
What was unclear Monday was whether the day’s developments merely represented a one-week delay in moving forward with the tax measures — Adley and Robideaux in separate interviews called them a “speed bump” — or whether they present intractable issues without easy solutions.
Senate President John Alario, R-Westwego, didn’t express great concern.
“I think it’s a normal thing in the democratic process that something like this happens,” said Alario, the dean of the Legislature with 43 years of service. “We wanted to start moving instruments to get a feel from our membership and the public on where they stand.”
Business lobbyists also have an intense interest. They filled the Senate committee room Tuesday.
Republican and Democratic legislators alike have said they cannot balance the budget solely through cutting government because that would mean the likely closure of college campuses and state hospitals.
Legislative leaders have focused their attention on Adley’s measure for two reasons. One is that they expected it would raise about $500 million per year, or fill about one-third of the projected budget deficit.
Another reason is that, under complicated rules set down by Gov. Bobby Jindal from the Washington, D.C., anti-tax group Americans for Tax Reform, the Legislature could offset that $500 million with up to $500 million of tax increases.
That is because the tax group has decreed that eliminating the inventory tax actually counts as a tax decrease because it repeals taxes that businesses pay. Under Jindal’s rules, any tax increases must be offset with tax or spending reductions.
“We’re not going to hear bills to raise revenue unless we have a repeal of other taxes to keep the revenue neutrality in place,” Robideaux said when asked why he changed his plans on Monday.
Robideaux’s committee was prepared to consider raising revenue by trimming an array of tax breaks for the film industry, the solar industry, businesses that invest in supposedly blighted areas and others. In all, his committee was scheduled to hear 23 tax-raising measures.
Now it will hear four non-controversial issues on Tuesday.
After deferring his bill, Adley said he was surprised that the Legislative Fiscal Office determined that his measure would not save the state any revenue next year, but he said he understood the logic. That’s because the inventory tax is paid by businesses to local governments as part of their property taxes. But that payment comes a year after the businesses are assessed for their inventory on car lots, in oil refineries, on warehouse shelves and the like.
Adley said he was also surprised Sunday night when his wife Claudia studied the bills to be heard by Robideaux’s committee and told him repeatedly that each measure would raise less than expected.
Greg Albrecht, the Legislature’s chief economist, explained why to the Revenue and Fiscal Affairs Committee: The amount of taxes owed by businesses the next year would be determined more by what they did in the out years, not the first year.
With a less generous film tax credit in the affected year, for example, companies might choose then not to make a movie in Louisiana two years from now. So the savings in terms of lower tax credits paid out would occur then.
“We can lower the cost of the program — two years later,” Albrecht said in an interview after testifying before the committee.
While legislators were chagrined by Monday’s developments, local government leaders were happy because Adley and his colleagues have yet to decide a key issue for them: How they would offset the money the local governments would lose from the inventory tax repeal.
Businesses pay inventory taxes to local governments to finance schools, police and other services, then turn around and claim a dollar for dollar credit from state government. A repeal would leave local governments without that money.
“Legislators say they want to make local government whole,” said Ronnie Harris, executive director of the Louisiana Municipal Association. “But the devil’s in the details.”
Follow Tyler Bridges on Twitter @TegBridges. For more coverage of the state capitol, follow Louisiana Politics at http://blogs.theadvocate.com/politicsblog/.