My kids play Jenga.
The idea is to remove blocks one by one from below and put them on top, which makes the tower taller but less stable. The loser is the player who pulls the block that collapses the structure.
One of the blocks in the Louisiana budget, the inventory tax credit, is being pulled by Gov. Bobby Jindal as a key component in finding money to fill a $1.6 billion deficit. Businessmen and local government officials have worried — ever since the administration leaked this idea in early February — that their political bargain, which has held for nearly a quarter-century, would topple and take their budgets, too.
Jindal hopes to save $526 million — $377 million from the inventory tax credit alone — by having the Legislature convert “refundable” to “nonrefundable” and thereby forego the need of taxpayers writing checks to private businesses for credits that exceed the amount of state tax owed.
Even as Commissioner of Administration Kristy Nichols explained Feb. 27 to a legislative committee how quickly and uncontrolled the cost of the inventory tax credit (and others) was growing, business lobbyists were tweeting “no way.”
The deal was that state government would refund every single dollar business spent on the inventory tax. Anti-tax icon Grover Norquist, whose blessing Jindal needs if he runs for president, may be OK with the scheme, but Louisiana businessmen are calling it a tax increase.
As a 34-year-old tax policy expert for the Louisiana Association of Business and Industry back in 1991, Don Allison was in that clutch of guys standing in one of the State Capitol’s many corners negotiating a way around obstacles. The hurdle in this case was the desire by LABI, the venerable lobbyists for its businessmen members, to rid the state of a burdensome tax that local governments needed.
Several say it was Allison who came up with the idea of letting local governments keep the proceeds and the state would reimburse. Now a Baton Rouge CPA and tax consultant, Allison won’t take full credit, though he acknowledges being part of the group that came up with the solution.
“It wasn’t so much that the locals said no but that it would have required a two-thirds vote (of the Legislature), which is difficult to get at any time but particularly with the local governments fighting it,” Allison said. “We had to come up with this other method to keep the local governments liquid but take care of business’s needs.”
LABI chief Stephen Waguespack, a former Jindal acolyte, said last week that the business community opposed the rollback of the inventory tax credit. But, he said in an interview, they’re fine with dumping the tax altogether. He’s open to discussions about how to replace that stream of revenues.
Talking is fine, says St. James Parish President Timmy Roussel, but the inventory tax accounts for 39 percent of the $59 million budget needed to run his parish on the Mississippi River between New Orleans and Baton Rouge. These aren’t esoteric services that involve other people, like health care. These will be cuts to cops and teachers.
The Parish Council, which also has been hearing the rumblings, discussed the situation at length Wednesday night, Roussel said.
“The sheriffs will lose millions. The schools will lose millions,” Roussel said. “We will lock arms. We are getting into protective mode.”
On average across the state, inventory taxes account for 11 percent of parish and municipal revenues, said Rapides Parish Tax Assessor Rick Ducote, who, as vice president of the Louisiana Assessors’ Association, has pulled together the figures. “A lot of the local taxing authorities are unaware, at least they are right now, of how hard this is going to hit,” Ducote said.
“That’s where the irreconcilable differences come into play,” said Ronnie Harris, a former mayor of Gretna and now executive director of the Louisiana Municipal Association, an advocacy group for cities and towns.
He suggests that everybody take a deep breath and sit down to talk about it. Harris understands the concerns of the business community and Jindal’s needs to raise revenues as well as rein in an out-of-control expense.
“But we simply can’t afford to lose that revenue, because it serves as the basis of local governments,” Harris said.
Mark Ballard is editor of The Advocate Capitol news bureau. His email address is firstname.lastname@example.org, and he is on Twitter, @MarkBallardCNB. For more coverage of government and politics, follow our Politics Blog at http://blogs.theadvocate.com/politicsblog/