Of six constitutional amendments before voters on Nov. 8, we urge a close look at three major issues that the Legislature has suggested as ways to deal with the state's chronic financial problems. Our view is that two of the three deserve the support of voters on the Nov. 8 ballot. Early voting begins Tuesday.
Amendment 3: Corporate Tax. Yes.
The language of the amendment deals with a provision in the constitution that allows mostly large corporations to deduct their federal income tax liability from the state's tax bill. That is a lavish tax break for the relatively few companies in the state who file as corporations; most Louisiana businesses are limited liability companies, and are not affected by the amendment.
The meat of the issue, though, is in companion legislation that will take effect upon adoption of the amendment. The top corporate tax rate will be lowered, from 8 percent to 6.5 percent, more in line with other Southern states. That reduces the tax bill for some companies. The elimination of the federal tax deduction will offset that loss to the state.
The current impact of this amendment on the relatively few corporations filing is limited, although it probably will bring in a bit more money for the state. However, the principle of broadening the tax base and simultaneously lowering the top rate is what we consider tax reform.
Amendment 5: Permanent Fund. Yes.
The boom-and-bust history of state finances would be changed if voters adopt an amendment that would create a permanent fund for the state's most volatile revenue sources, oil and gas taxes and corporate income and franchise taxes. The idea is that when oil rises again -- devoutly hoped-for in Louisiana's oil patch -- the windfall will be diverted to a permanent asset for the state instead of being spent via the general fund.
It is a complicated amendment, involving various triggers of different levels of funding that would be diverted, and how investment proceeds from the fund might be spent. Until oil prices rise dramatically from today's levels, this amendment will have no impact.
At some future date, though, it would at least be something of a speed-bump for legislators wishing to spend whatever new revenues coming from a short-term oil boom.
Amendment 6: Protected funds. No.
Another complicated fiscal proposal would change the rules by which legislators can dip into dedicated funds in cases of a budget shortfall. While a good concept, the details of this amendment appear to protect more funds in some ways than current law does. The "triggers" for the fund "sweeps," to use legislative language, could be another incentive for lawmakers to use one-time money for the operating budget, one of the ills that has caused many state financial problems.
We urge lawmakers to take another cut at this issue with a comprehensive budget reform that does not leave such a patchwork of funds in place.
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