Our sins are going to cost us more on April Fool’s Day, like smokes and beer, but just about everything else purchased in Louisiana also will become more expensive at the checkout counter.
The reason? An emergency package of tax increases to plug the budget holes left by former Gov. Bobby Jindal’s administration.
One can debate the propriety of any new tax or even those making a comeback: Taxing rental cars more is an old tax, 3 percent on short-term rentals, that had expired and is now brought back. Another tax on telephone bills had been due to expire but was continued beginning today.
Cigarettes, beer, wine and liquor all will cost more money, but most states have turned to those sinners for extra revenues. Louisiana is not in that sense adding a burdensome new category of taxation.
But the big money in terms of state revenues, and consumers’ costs, are in sales taxes.
The penny of additional tax on every dollar of purchases puts Louisiana’s average sales tax, including state and local levies, as the highest in the nation, 10 percent. A few jurisdictions are even more, including the city of Central in suburban Baton Rouge and the French Quarter, where there is a new sales tax levied by New Orleans for public safety in the tourist Mecca.
For businesses, there are substantial tax increases that may not be obvious to the consumer, but the sales tax is the highly public addition to state revenues. It still will not be charged on food for home consumption, residential utilities and prescription drugs. But a slew of other exemptions usually free of sales tax are now taxed; other tax credits and exemptions were reduced by the Legislature last year as the new funding crisis evolved.
The new “clean penny” increase is technically a “sales and use” tax, so businesses pay it on many materials purchased to make other products.
For what? We don’t like higher taxes more than anyone else, but the reality is that the sales tax pushed by new Gov. John Bel Edwards was the only way to generate the large amounts of money needed to balance this year’s budget.
The calendar was punishing for new legislators and a new administration in the State Capitol. The state’s fiscal year runs out on June 30, so the $300 million or so in new taxes that will be collected this quarter were a necessary part of cobbling together a budget that would last. The sales tax also continues in the new fiscal year beginning July 1.
We won’t go here into our concerns about the sales tax being a bad idea, because it should be apparent our state should not be No. 1 in this category. In some cases, businesses or individuals may well decide to defer big-ticket purchases in the hopes that the goalposts will move again in the Legislature soon.
While the new governor and Legislature had to make tough decisions in the first special session this year — on a very tight time frame — there is the double disappointment for citizens that these temporary taxes are not a permanent solution to the state’s revenue problem.
Louisiana is probably going to get even more taxes. The severe cuts to education and health care that would otherwise result are too much to be readily borne. But what kind of certainty is there going to be for consumers and businesses going forward?
We will have to await another special session in June to see what the new fiscal year’s tax posture is finally going to be.