A state House panel passed several more tax increases on Tuesday to set the stage for the first major clash of the 2015 session: Legislative leaders will ask the full House on Thursday to approve those taxes and others that would raise hundreds of millions of dollars to balance Louisiana’s looming budget deficit.
On one side will be supporters of Louisiana’s beleaguered public hospitals and colleges and universities, who say the new revenue is the only way to avoid gutting their programs and services.
On the other side: powerful business lobbies and Gov. Bobby Jindal, who say the tax increases would discourage investment in Louisiana’s economy.
At stake are tax breaks enjoyed by practically every business in Louisiana, but especially those to produce solar energy, make movies and television shows, invest in inner-city neighborhoods and create jobs for low-income residents. Wealthy individuals also stand to lose some tax breaks, and smokers are facing at least a 32-cent per pack increase in cigarettes.
Thursday’s votes will culminate a three-week effort by the House Ways and Means Committee and its chairman, state Rep. Joel Robideaux, R-Lafayette, to approve as many tax bills as possible — including measures that contradict each other — to give House members as many options as possible to approve.
“It’ll be a big day,” Robideaux said in an interview Tuesday. “Thursday is the day that House members will send a message about whether they are willing to devastate higher ed or trim tax incentives to save higher ed. It’s that clear. It’ll be a big day.”
Business trade associations don’t welcome being pitted against LSU, Southern and the state’s other colleges and universities.
“Nobody appreciates the higher ed community more than the business community,” Jim Patterson, a business lobbyist for the Louisiana Association of Business & Industry, told Ways and Means on Tuesday. “They are critical to our economy. We get that. But we ask that you not do damage to our economy.”
It’s not clear that the 105-member House will have the appetite to approve the tax package sought by legislative leaders since doing so would upset important constituencies back home during an election year.
What is clear is this: “It will be a long day,” said House Speaker Chuck Kleckley, R-Lake Charles.
The state constitution says raising taxes and fees requires a two-thirds vote, meaning at least 70 members. However, the House will operate under a 1993 opinion by then-Attorney General Richard Ieyoub that it can trim tax breaks or temporarily end them with just a majority vote.
That is a “legal fiction,” C.B. Forgotston, who as a legislative attorney and senior staff member helped rewrite the state constitution in 1973, wrote in a blog post Tuesday. But he said Ieyoub’s opinion would stand unless it was overturned in court.
Whatever taxes the House approves on Thursday will go to the Senate for consideration. Senate President John Alario, R-Westwego, has been holding on to a major tax bill approved by the Senate Finance Committee, depending on how much the House raises.
The bill before the Senate would repeal Louisiana’s inventory tax — a measure supported by business lobbies but opposed by local governments since businesses pay the tax to them.
Tim Barfield, the Revenue Department’s secretary and Jindal’s point man on tax issues, said most of Thursday’s tax measures before the House face the governor’s opposition because they represent net tax increases.
“What’s concerning is that we only see increases, not decreases,” Barfield said.
An all-but-announced presidential candidate, Jindal is following guidelines established by Americans for Tax Reform, a Washington, D.C,, anti-tax group. Legislators call those guidelines the governor’s “swim lanes.”
Legislative leaders’ willingness to raise taxes marks an about-face.
During Jindal’s seven years, the Legislature has passed a series of tax breaks for businesses and higher-income individuals on its own initiative and at the governor’s behest.
At the same time, businesses appear to have become increasingly sophisticated in taking advantage of loopholes to avoid paying taxes. In 2013, for example, the state collected $288 million in corporate taxes but could have collected nearly $2 billion but for the tax breaks.
That must end, say legislative leaders, given the $1.6 billion budget deficit the state faces for the coming fiscal year that begins on July 1.
Lawmakers have said repeatedly that they don’t want to raise taxes but have no other option.
“I’m trying to get revenue to fix the budget,” said state Rep. Jim Fannin, R-Jonesboro, who chairs the House Appropriations Committee. He said the state needs at least $800 million in new revenue to avoid making drastic cuts to public health care and the state’s colleges and universities next year and even more to prevent any cuts at all.
Robideaux and Kleckley said the House is voting on the tax bills Thursday because Fannin’s committee needs to pass its version of the state budget by Tuesday, and the committee needs to know how deeply it must cut. The House would consider the budget on May 14, Fannin said. If approved, it would then go to the Senate for consideration.
The House and Senate have until the session’s final day — June 11 — to approve a balanced budget for Jindal’s approval. He has said he would veto it if the budget contains a net tax increase.
Ways and Means has approved more than $1 billion in taxes, but the governor supports only $100 million of them — which are contained in House Bill 805. It would eliminate $100 million of refunds from the state that businesses receive by paying inventory taxes to local governments.
“It appears we’re not swimming in the swim lanes he has assigned to us,” said state Rep. John Bel Edwards, D-Amite, who plays a key role as the Democrats’ House leader. “It looks almost certain that there will be money in the budget that violates his definition of a tax increase. How do you fix problems in a revenue-neutral way when the problems are caused by a revenue shortfall?”
Kleckley downplayed the likelihood of a clash with Jindal.
“It’s very early in the process,” he said. “This is just the first step.”
Ways and Means on Tuesday approved six different measures that would cut tax breaks for businesses or higher-income taxpayers. Exactly how much all of those measures would raise was not clear Tuesday because several of them included amendments, and the legislative staff didn’t have time to calculate the fiscal impact.
Ways and Means also approved two measures to improve Louisiana’s roadway system. House Bill 778 would do so by raising the state’s sales tax by 1 cent, which would raise $670 million per year for 10 years. House Bill 777 would raise the gas tax by 10 cents, which would raise $300 million per year.
Follow Tyler Bridges on Twitter, @TegBridges. For more coverage of the State Capitol, follow Louisiana Politics at http://blogs.theadvocate.com/politicsblog.