State lawmakers’ willingness to raise taxes that Gov. John Bel Edwards says are needed to prevent devastating cuts to vital government services will get its first test Tuesday in the special legislative session.
The test will take place in a State Capitol basement room where the 19 members of the House Ways and Means Committee are scheduled to vote on nearly 40 different tax measures beginning Tuesday morning.
“Members are processing whether they can vote for new revenue measures and which ones,” state Rep. Jay Morris, R-Monroe, said in an interview, summing up the view of others.
Edwards is proposing to raise about $350 million by raising taxes on sales, tobacco, alcohol and telephones and by trimming tax breaks for corporations and individuals. He is also seeking to cut at least $160 million in government spending and use $328 million in one-time money — all to close a $900 million shortfall by June 30.
The Ways and Means Committee has spent the past week hearing testimony on the measures, with interest group after interest group essentially telling them, in a saying credited to former Sen. Russell Long: “Don’t tax you, don’t tax me, tax that fellow behind the tree!” (The business lobbyists tend to use arcane language to make their case.)
It appears that the committee will agree to tax somebody, although who that somebody is won’t be clear until the committee finishes its work.
The leader of the Republican-controlled House, Speaker Taylor Barras, told reporters Monday that testimony on the impact of cuts before the Appropriations Committee shows that the state needs more revenue.
“The testimony has magnified the true cost of the cuts we face,” Barras, R-New Iberia, said, adding that he expects the full House on Thursday to take up the tax bills approved by Ways and Means.
Barras and other House Republican leaders say it will be easier for rank-and-file Republicans to vote for new taxes if Edwards will agree to long-term structural changes in the budget.
House Republicans, under the direction of their caucus leader, state Rep. Lance Harris, were finishing up their list of ideas but did not provide them to Edwards Monday as planned.
Harris declined to provide specifics in advance of a meeting, saying only they would be presenting “things our members want.”
The items are believed to involve pensions for state employees, the tax system, sentencing laws, transparency in government and how the state spends money on roads and bridges. Edwards told The Advocate Friday night that he was open to hearing their ideas.
On one potentially contentious issue, state pensions, Edwards said any Republican plan would have to apply only to new hires, would not cost the state more money and would not run afoul of the IRS since state employees do not receive Social Security.
“I personally doubt there is savings to be realized through what you’re being told is pension reform,” Edwards said. “But am I willing to look at it? Absolutely, I’ll do that in good faith with them.”
The governor’s most controversial tax measure, House Bill 62, by state Rep. Katrina Jackson, D-Monroe, would raise the state sales tax by a penny to five cents. (Consumers pay more because of sales taxes added by local governments.)
Nearly 200 types of transactions are exempt from sales tax. Jackson’s bill would not allow those exemptions on the additional one-cent, in what tax insiders call “a clean penny.” Her measure would raise an estimated $220 million before June 30 — meaning it would raise more than half of the $350 million that Edwards wants — and $910 million the following year.
House Republicans are insisting that Edwards agree to limit the one-cent sales tax increase to three or five years, which he could accept if the Legislature would raise other taxes to offset the disappearance of the additional penny.
At the same time, Jackson and state Rep. Julie Stokes, R-Kenner, have separate bills that would eliminate the exemptions on the existing four cents of sales taxes, which are known as “dirty pennies” because of the exemptions on them.
Making those four pennies clean of exemptions would raise $84 million before June 30 and $436 million next year, according to an analysis done of Jackson’s House Bill 101. (No fiscal note exists yet for Stokes’ House Bill 104.)
Some veteran political insiders expect Ways and Means to approve only the one-cent sales tax and let the Senate decide whether to approve additional revenue-raising measures.
But it’s possible that corporations will take a hit, as they did last year. As The Advocate reported last week, corporate tax collections are in the red by $210 million so far because of all the tax loopholes they receive.
The Louisiana Legislative Auditor added fuel to the argument that companies are undertaxed when it reported Monday that in 2014 the state collected $624 million in corporate taxes while tax exemptions kept the state from collecting another $1.7 billion.
The rise in corporate tax exemptions is a major reason why the state collected $7.49 billion in all taxes in 2015 but could have collected $7.9 billion but for the myriad exemptions, the report found.
“No state should ever be giving away more to corporations than they paid in taxes,” tweeted out the Pelican Institute, a Libertarian-minded think tank in New Orleans. “Not business-friendly!”
In the meantime, the Edwards administration has been quietly rallying various interest groups that would face the major cuts, including representatives from health care companies, the state’s public colleges and universities and the state’s prison system. Several hundred senior citizens are expected to flood the Capitol Tuesday to ask lawmakers to support tax increases, and more than 1,000 students are expected to do the same on Wednesday.
Edwards also took time to lay out the state’s budget problems to three of his predecessors on Friday at lunch at the Governor’s Mansion: Buddy Roemer, Edwin Edwards and Kathleen Blanco. Mike Foster begged off. Bobby Jindal, Edwards’ immediate predecessor and frequent target of criticism, was not invited.
Follow Tyler Bridges on Twitter @TegBridges. For more coverage of the governor’s race, follow Louisiana Politics at http://blogs.theadvocate.com/politicsblog/.