There they go again. If not in so many words, that was the gist of a conversation with Vic Stelly, the legislator from Moss Bluff near Lake Charles who is best-known for his tax reform plan that he pushed uphill in the Legislature and was ultimately adopted by the people in a 2002 vote.
Before the adoption of the Stelly Plan, legislators were regularly called upon to vote to renew “temporary” sales taxes — money that state government could not do without, but requiring a politically difficult two-thirds vote of both House and Senate. Governors of the day had to dicker and deal with lawmakers to get to the magic number, 70 in the House and 26 in the Senate, to balance the budget.
It was no way to run the State Capitol. Stelly’s plan “swapped” permanent cuts in sales taxes on the necessities of life — groceries and residential utilities — for increases in the income tax. Now, Louisiana is “back where we were,” in Stelly’s words, before his plan was created.
With repeal of the budget-balancing income tax increases in 2007-08, years of fiscal instability followed under Gov. Bobby Jindal. Today, the budget is balanced with another “temporary” sales tax enacted in 2016. It is supposed to expire next June. And lawmakers were supposed to rewrite the tax code this summer in a fiscal session, to end the temporary sales tax. Supposed to, and didn’t.
As Stelly recalled, the state’s financial condition worsened and the Wall Street bond analysts noted the precarious nature of the state budget in the years before the Stelly Plan was adopted. Now, with oil prices crashing and the state finances in disarray after eight years under Jindal, the financial and political dangers of constant renewal of a sales tax are once again inevitable.
The business community desperately seeks financial stability. Would that legislators would listen.
Quiet meetings are taking place among bipartisan groups of legislators to determine if there is a way forward. Gov. John Bel Edwards, who would almost certainly support a Stelly 2.0 in some form, is frustrated with what he sees as a lack of willingness on the part of the House’s GOP leadership to back tax reforms.
A public letter from the governor calling for a GOP plan, an outward and visible sign of Edwards’ frustration, might undercut low-key discussions over the summer.
Then again, the House GOP leadership seems to have little control over its hard-core anti-Edwards wing, so what harm can another verbal blast do?
Above all, the current situation is recreating the pre-Stelly problem of financial instability. Wall Street has definitely taken notice.
Even if there was some magical removal of the House GOP’s roadblocks, timing alone would likely force legislators to keep some portion of the temporary sales tax on the books past its expiration date. Revenues from an income tax increase or suspension of more business tax breaks would take time to develop, while sales tax revenues start rolling in more quickly. That is why the only realistic option in 2016 was one the governor did not like, the one-cent sales tax increase.
Now, we may be stuck with it.
Vic Stelly was right all along.
Kenny Leithman: The four-term legislator from Gretna who died at 86 was one of the Young Turks, the group of new lawmakers who reformed state government in the late 1960s and 1970s, led by figures like House Speaker E.L. “Bubba” Henry from north Louisiana and the late John Hainkel of New Orleans. Louisiana benefited greatly from their leadership.
Email Lanny Keller at firstname.lastname@example.org.
Here's something you can take to the bank: If politicians are issuing letters to one another…