A bill that would produce big savings to the state treasury — but that gives big heartburn to local government officials — will be the first tax measure heard by the Louisiana Legislature this year when the Senate tax-writing committee convenes Monday.
Senate Bill 85 would repeal the state’s business inventory tax. To make sure everyone understands the political importance, it will be the only tax measure heard that day by the Senate Revenue and Fiscal Affairs Committee.
The panel’s chairman, state Sen. Neil Riser, R-Columbia, said he expects a fierce debate by both sides. But it seems likely that the local governments will end up on the losing side.
“I just got bad vibes with this committee,” said Roland Dartez, executive director of the Police Jury Association of Louisiana. He believes the panel will approve the legislation, which is sponsored by state Sen. Robert Adley, R-Benton.
The measure is the opening gambit in a complicated chess game by legislators to figure out how to plug a massive $1.6 billion projected budget deficit.
After seven years of championing tax cuts under Gov. Bobby Jindal, lawmakers are considering raising taxes on cigarettes and gasoline and trimming or ending an array of business tax breaks that have grown exponentially. Jindal will only accept tax increases that are offset by spending cuts elsewhere in the budget.
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.
Eliminating the business inventory tax would save state government $452 million but cost local governments about $550 million, according to estimates.
Under the unusual tax, businesses pay the money to local governments that use the money to pay for local fire, police and other services. But the businesses qualify for huge tax refunds — $376 million in the latest year — that they get from the state treasury. Given the big state budget deficit, lawmakers are asking why the state should award such big tax breaks to businesses that actually fund the operations of local governments. “Corporate welfare,” Jindal has taken to calling them.
“I know there are some legislators who want to repeal the inventory tax all together,” Jindal told reporters during a press briefing Thursday. “I think that’s a discussion that needs to be had.”
Senate President John Alario, R-Westwego, said the intent of Adley’s bill is not to harm local governments.
“We’re hoping the bill will move forward and tell the House how we’re prepared to get additional revenues to make it all work,” Alario said in an interview. “We will work diligently with local governments to make sure nobody gets hurt. The bill is an effort to bring everybody to the table.”
By that last statement, Alario means local governments need to begin telling state legislators what steps to take to help the locals make up the lost revenue.
The House tax-writing committee — known as Ways and Means — will begin hearing a slew of tax bills on Tuesday. Its chairman, state Rep. Joel Robideaux, R-Lafayette, said what he and his committee members do on Tuesday depends on Monday’s action by the Senate committee.
To ultimately become law, Adley’s bill would have to pass muster with the state Legislature and voters in the fall because it would amend the state constitution.
Adley said repealing the inventory tax is sound policy because local governments have had no incentive to control the amount of inventory claimed by businesses.
“Right now, there are no checks and balances,” Adley said. “Businesses can report what they want. It’s gotten out of hand.”
But, like Alario, Adley said he doesn’t want to hurt local governments.
“My political sense is that this bill opens the door for a lot of other things to happen that would allow us to the fill whole budget gap,” he said. “I’ve asked local governments to tell me which things are hampering them so the state can get rid of them.”
Those things could mean restrictions on local governments that prevent them from requiring residents and businesses to pay certain taxes — taxes that could be used to pay for the government services they receive.
In choosing to repeal the inventory tax, Adley decided not to push — at least for now — an alternative bill sought by Jindal that would eliminate the $376 million worth of tax refunds that businesses receive. Powerful business groups oppose this measure.
Adley said that if the inventory tax repeal fails on Monday, he will return with Jindal’s measure, which is Senate Bill 126.
Mark Ballard and Elizabeth Crisp, of The Advocate Capitol news bureau, contributed to this article. Follow Tyler Bridges on Twitter, @TegBridges. For more coverage of the State Capitol, follow Louisiana Politics at http://blogs.theadvocate.com/ politicsblog/.