Gov. John Bel Edwards wanted to trim a tax break the wealthy enjoy to fully fund TOPS, but Louisiana House Republicans denied him.
No, it’s not politics, GOP House leaders insist; it’s a matter of timing.
House Speaker Taylor Barras said the concept likely will come up next year when the Legislature tackles revamping the way state government collects and spends taxpayer dollars. He doesn’t want to give away that chip too early.
The Republican banker from New Iberia said an important part of the coming “tax reform” effort is the concept of scaling back the ability of 23 percent of Louisiana’s taxpayers, most of whom make more than $100,000 annually, to write off itemized federal tax deductions they’ve claimed on their personal state income tax returns.
Instead of allowing 100 percent of the itemized deductions, Edwards wanted to set the rate at 57.5 percent, which would allow taxpayers to deduct their charitable contributions and mortgage interest payments but eliminate deductions for such expenses as gambling losses, health expenses and unreimbursed business expenses.
That modest proposal would have raised about $116.7 million, part of which could have helped to fully fund the $300 million Taylor Opportunity Program for Students scholarships. (In the end, TOPS students are going to have to pay a couple thousand out of pocket to make up for the 70 percent funding approved in the final minutes of the second special session which ended Thursday night.)
Ratcheting back itemized deductions ran into opposition in the House Ways and Means Committee.
Hoping to win some converts to House Bill 11, Ruston state Rep. Rob Shadoin teamed with fellow Republican Rep. Julie Stokes, of Kenner, to link the idea to the beginnings of “tax reform” by giving voters the chance to eliminate the tax break in exchange for a single, flat rate.
Edwards agreed. The GOP-dominated Ways and Means Committee said “no.”
Rookie state Rep. Malinda White, D-Bogalusa, took a second go at it with her House Bill 38. HB38 was first amended to raise $113 million to clear the committee. On the floor, she tried to win converts by letting the wealthy keep all their deductions — except for write-offs for what was paid in state and local taxes. It would have raised about $88 million.
Edwards said OK. A nearly party-line vote said “no.”
Senators then tried to resurrect the idea by tacking the language of HB38 onto another bill. Such a maneuver would have required the House to approve, and for a couple days in the 18-day special session, everything stood still while Edwards tried to turn six votes. But the House Republicans held firm, and Senate President John Alario, R-Westwego, decided the morning of the last day that he wouldn’t require senators to vote on a tax measure that had no hope of passage.
The Legislature ended up approving less than half of what Edwards said he needed to more fully fund public schools, TOPS, colleges and universities, charity hospitals, prisons and other services.
“The irony of all this,” said Minden state Rep. Gene Reynolds, who heads the House Democratic caucus, “is that this (trimming excess itemized deductions) will come back next session, but it’ll be under the banner of tax reform with some Republican’s name on the bill, and it’ll pass easily.”
Edwards said “tax reform decisions” next spring will be more difficult than anything legislators tackled this year. He hoped they would show more courage when they face pretty much the same proposals they rejected over the past three weeks. Ducking those decisions this time around, however, didn’t raise the money necessary, which will visit “a year’s worth of pain on a lot of people for no reason,” he said.
Lance Harris, who is Reynolds’ counterpart for House Republicans, will be tasked next spring with lining up votes among the majority for tax reform.
That was why he said he opposed Edwards’ effort this year. Packaging changes to corporate and individual tax structures so each side can see what the other is giving and getting is the only way to sell it.
“If we give away all the reform in piecemeal fashion, it’ll make it hard for the future,” Harris said. “Let’s go home, and let’s work toward true reform next year.”
“They say they want to wait for the massive reform next year. I call ‘bluff’ on that,” Stokes said.
Stokes is a pragmatic certified public accountant clearly frustrated after bunking in Baton Rouge since Valentine’s Day and watching her steps toward the fiscal revamp get shot down time and again by her fellow Republicans.
“This session devolved into the kind of partisan politics that is devoid of trying to solve problems and do the right thing,” Stokes said.