State lawmakers have made a lot of progress in identifying possible sources of revenue to prevent disastrous cuts to higher education and health care, but it’s not time to string a “Mission Accomplished” banner across the Capitol just yet. With some tweaking in the Senate, though, revenue-raising bills already passed by the House could secure a workable budget. We urge senators to build upon the House’s hopeful start. Lawmakers began the legislative session with a $1.6 billion state budget deficit. A series of revenue-raising bills and other measures have closed about $860 million of that gap.
Several bills to reduce exemptions or other tax breaks await action in the Senate Finance Committee. The effect of these proposals is higher taxes on somebody during the fiscal year beginning July 1.
House members broadly accepted the need for more revenue, forwarding some $615 million in money-raising legislation to the Senate. The tax derby is on, fueled by a commonly shared assumption that more money is needed for the state budget. The only real question now is what how much extra revenue will be generated, and where it will come from.
Gov. Bobby Jindal has pushed smoke-and-mirrors bills that would offset, at some future time, the impact of the increases, a fig leaf aimed at allowing him to preserve the boast that taxes didn’t increase on his watch.
What remains to be settled is the price for taxpayers, individual and corporate. We think a number of these revenue-raising ideas can be embraced without damaging the state’s business climate. One prospect for reform is the much-debated film tax credit. Two studies have shown that the film credits, as currently administered, are a big money loser for the state.
One bill would ostensibly cap the state’s annual spending on the film credits at $200 million, along with some limits on what moviemakers can claim as credit-worthy expenditures. But it’s not clear that the bill, as presently written, is a cap at all. The cause of reform here is clearly a work in progress.
Another option for generating more revenues is increasing the tax on cigarettes, an idea we’ve supported in past years. The House-passed 32-cent increase per pack is too low to discourage a young person from picking up a bad habit, and the extra $68 million that increase would generate isn’t going to put much of a dent in the budget shortfall, either.
The possibility of an even larger increase might be bad news for smokers, but budget realities make that scenario a likely one as the bill moves through the Senate. The national average tax on a pack of cigarettes is $1.54, significantly above the current proposals before Senate Finance.
Finally, there’s another piece of the tax puzzle: the inventory tax rebate. It’s one of six major tax credits that mushroomed in the Jindal years. The cost to the state has doubled since 2008 to $427 million last year. The House approved a 25 percent reduction in the credit, but there’s room for a sharper cut in the Senate.
This will be a business tax increase, but certainly a temporary one. The new governor and Legislature to be elected this fall will almost surely have to revisit the rebate program next year, no matter what’s decided in this legislative session. Like the senators, we’re not sure how this tax derby will end up, but the need for additional revenues is obvious at this point.
Approving tax increases isn’t fun for lawmakers seeking re-election, but those increases are necessary as the Senate works to balance the budget.