As he offered his “menu of options” to stabilize Louisiana’s finances, Gov. John Bel Edwards’s list might have surprised some of his own voters, containing a wide array of tax hikes that went beyond the budget-balancing proposals he outlined during his campaign.
The Democratic governor, in office for two weeks, talked about taxes during his campaign, when asked about his solutions for ending Louisiana’s chronic budget shortfalls.
But while Edwards talked broadly about the need to raise state revenue and bring in more money for the treasury, he didn’t talk about sales tax boosts and income tax increases, like those included on the two-page list released last week.
Instead, Edwards the candidate focused most heavily on scaling back the state’s generous tax break programs. He called them “tax expenditures,” saying they were equivalent to state spending that needed to be reviewed.
“If they’re not producing the return on investment, if they’re costing more than they were supposed to cost, you eliminate or reduce them,” he said in one debate.
At another, he said: “When you end a tax giveaway, that is not the same thing as raising taxes, and that’s the approach that we need to take.”
While Edwards included several cuts to tax break programs among the proposals he released last week, it was a handful, not exactly an extensive review of the hundreds of tax breaks on the books.
The new governor proposed tax increases on cigarettes, alcohol, phone service, car rentals and online hotel bookings. He proposed charging corporate franchise tax on more businesses.
These were included on his “menu of options” for lawmakers to consider ahead of a three-week special legislative session planned to start Feb. 14, aimed at halting perpetual cycles of budget gaps and steadying the state’s finances.
The heftiest item is a proposed sales tax hike to raise the state’s 4-cent sales tax by another penny on every dollar spent. Estimates are the increase could raise $216 million for this year’s budget if it kicks in April 1, and $907 million annually.
The broader tax approach, the Edwards administration suggests, reflects the worse-than-expected financial situation the governor inherited from Republican Bobby Jindal. Edwards said his predecessor left the budget in such disarray that tax increases are needed to keep public education and health care services from devastating cuts.
“I am serious when I say that raising taxes would not be my first, second or third option,” Edwards said.
The Edwards administration estimates Louisiana has a $700 million-plus shortfall in the remaining five months of the $25 billion budget that ends June 30, and a gap reaching as much as $1.9 billion next year.
Jindal and lawmakers didn’t include enough money in the budget to cover the programs included. Also, Louisiana is expected to bring in less tax income than projected when the budget was built, partially due to plummeting oil prices.
Compounding the problems, Jindal used short-term fixes rather than support anything he considered a net tax increase. About $800 million in piecemeal financing used in this year’s budget won’t be available next year.
“Our budget has not been balanced in a responsible way,” said Edwards’ top financial adviser, Commissioner of Administration Jay Dardenne.
Few would disagree with the bleak budget outlook, except maybe Jindal and his closest advisers. But that doesn’t mean everyone’s on board with Edwards’ tax ideas.
Republican legislative leaders were conciliatory, saying they appreciated Edwards giving them such a broad list to discuss. But they were noncommittal — and suggested they would expect a mix of cuts and taxes, rather than offsetting next year’s gap mainly with taxes.
Ask lawmakers to recommend areas where they think Louisiana should spend less, however, and the list is short and nowhere near $1.9 billion, if a list is offered at all.
Edwards delivered on his promise to end the “smoke and mirrors” about Louisiana’s budget. Now that the stark, unattractive reality remains, the next step is determining if lawmakers and the public can stomach $1 billion to $2 billion in tax increases to keep existing government services afloat or if the state will spread deep cuts across programs.
Melinda Deslatte covers Louisiana politics for The Associated Press. Follow her on Twitter, @melindadeslatte.