That’s the question that echoed throughout the State Capitol Tuesday after the centerpiece of Gov. John Bel Edwards’ tax package – a proposed levy on corporate sales known as the commercial activity tax – died before the House Ways and Means Committee in the face of vociferous business opposition.
Only one person testified in favor of House Bill 628 while 94 turned in red cards indicating their opposition.
State Rep. Sam Jones, D-Franklin, the sponsor of HB628, asked the committee to voluntarily defer the bill, which it did without a vote. Jones wanted to avoid embarrassing himself and the governor with a lopsided defeat and wanted to keep Democratic members of the committee from having to vote for a tax that had no chance.
Jones’ conceded afterward that his move effectively means the commercial activity tax is dead for the legislative session.
Edwards had originally proposed the measure as the linchpin of his overall plan to prevent the “fiscal cliff,” when $1.3 billion in temporary taxes will expire in mid-2018.
The Democratic governor wasted no time in trying to gain the political high ground, assembling reporters in the lobby of his 4th floor Capitol office less than two hours after the committee decision to tell them that the ball is now in the court of the House Republican leadership.
“At this point, I’m asking the House leadership to step up and offer solutions and not just continue to say no, but offer solutions and a plan and have a good healthy discussion with them going forward so we can fix our problems,” Edwards told reporters.
But the governor – nor anyone else – could say with certainty what happens next on taxes and the budget.
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A question to the governor pointed out that after making changes to HB628 in a failed attempt to make it more palatable to business interests, he was now far short of raising enough revenue to solve the fiscal cliff. What is his plan now?
Edwards would not say.
“There are plenty of instruments before the Legislature that are available that would fix the problem,” he said, declining to be more specific.
Speaker Taylor Barras, R-New Iberia, said later that he doesn’t disagree that the onus is now on the House, adding that the Ways and Means Committee will vote on tax measures Monday and Tuesday that could win support.
“We have a good bit of work to do,” he said, acknowledging that House leaders don’t yet have a full plan for the fiscal cliff.
The focus is on the House both because tax measures that would help head off the fiscal cliff must begin in Ways and Means and because the House Appropriations Committee always takes the first crack at writing the state budget. In the past, governors of either party could generally count on a friendly speaker. But Republicans in the House last year pulled off an upset when they elected one of their own, Barras, to be speaker.
As The Advocate reported last week, Barras and the two other major House leaders, state Rep. Cameron Henry, R-Metairie, and state Rep. Lance Harris, R-Alexandria, presented the broad outlines of a budget plan to two top Democrats, state Rep. Gene Reynolds of Minden, the House Democratic leader, and state Rep. Joseph Bouie of New Orleans, who chairs the Legislative Black Caucus.
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The plan presented privately by Republicans Thursday would fund next year’s budget at 97.4 percent of the current year’s budget as of March 1, with an extra $92 million to fully fund the TOPS scholarships and to provide funding to continue aid for programs that serve medically fragile children. The three Republicans termed it a “standstill” budget that would spend no more money next year than this year. Barras, Henry and Harris promised to meet with the House Democratic caucus on Thursday to provide more details on what government programs and services they propose to cut.
The proposed plan – which would ultimately have to win approval in the House, in the more moderate Republican Senate and from the governor – would solve about half of the $1.3 billion fiscal cliff, Barras said Tuesday.
Stephen Waguespack, president and chief executive officer of the influential Louisiana Association of Business & Industry, effectively cheered on the House Republicans by saying he hopes that the Legislature will keep its focus on spending alone.
“Four the last six sessions have done nothing but raise taxes, and we’re in a recession now,” Waguespack said in an interview after the committee vote. “We need to bring government spending in line with expenses.”
Republican and Democratic members of the House said in interviews Tuesday that they are conducting private conversations to try to find a solution.
“I’m going to continue to try to work to come up with a plan,” state Rep. Jim Morris, R-Oil City and Ways and Means’ vice chairman, said in an interview after the vote. “We’ve got to find some way to fix it.”
Tuesday’s vote was the first big one in Ways and Means, during the third week of the 60-day legislative session. The committee has yet to take up Edwards’ bills that mirror the recommendations of a blue-ribbon panel that studied the tax system throughout 2016 at the Legislature’s request. Those measures would close tax exemptions in conjunction with lowering income and sales tax rates and extending the sales tax to a number of items currently subject to taxation in Texas but not in Louisiana.
Republican lawmakers have offered various tax bills. Barras mentioned one that will get a hearing next week before Ways and Means. House Bill 648 by state Rep. Kenny Havard, R-St. Francisville, would eliminate the corporate income and franchise taxes and replace them with a “gross margins” tax on corporations of about 1 percent. Havard’s proposal can impose such a low rate because it would eliminate all corporate tax exemptions. The bill would raise an estimated $200 million per year.
Senators, meanwhile, are mostly bystanders while the House grapples with revenue-raising tax bills and its version of the budget.
The Senate Revenue & Fiscal Affairs Committee did approve two tax measures on Monday. Both would cost the state money if ultimately enacted into law. Senate Bills 24 and 27 by state Sen. JP Morrell, D-New Orleans, would create a sales tax exemption for the purchase of diapers and tampons, with the approval of voters in 2018. It would cost $7.5 million per year.
Senate Bill 180 by Morrell would restore a tax exemption for the purchase of medical devices. It would cost $16.4 million per year.
Officials in Gov. John Bel Edwards' administration are now admitting that the proposed Comme…