As Republican lawmakers push forward tax cuts for the oil and gas industry and other sectors, Democratic Gov. John Bel Edwards on Monday came out against such tax breaks, saying they would hamper the state’s ability to fund critical services.
Edwards, whose administration has cobbled together a state budget plan hammered by a $1 billion loss in revenues caused by the pandemic, said efforts to cut taxes would further hurt the state’s ability to fund services like health care, which is especially important during a public health emergency. If Louisiana’s revenues are short of expenses, health care and higher education have historically taken the brunt of budget cuts because of the way the budget is structured, though agencies would take only a 2% cut under Edwards’ plan because of more than $1 billion in federal aid.
“I don’t think it’s ever a good idea to have wholesale cuts to health care but you certainly don’t want to do it when there’s a public health emergency,” Edwards said during a press conference Monday.
The House Appropriations Committee advanced a bill by state Rep. Phillip DeVillier, R-Eunice, to cut severance taxes, which is levied on oil, gas and other resources, by more than $112 million over five years.
Another measure, House Concurrent Resolution 66, by House Ways and Means Chairman Stuart Bishop, R-Lafayette, to suspend franchise taxes entirely for small businesses for more than a year – a $10.2 million tax cut over the next two fiscal years – passed the full House on a 72-to-24 vote. That legislation was recommended by a task force of business executives created by legislative leadership to respond to the pandemic.
Members of the Legislature’s Republican majority have repurposed legislation long sought by business groups as coronavirus relief proposals. Cuts to severance taxes on oil and gas, franchise taxes, and other measures have gained new life as Republicans argue businesses need relief to rebound from the severe economic downturn.
GOP legislators and the head of the Louisiana Oil and Gas Association argued the legislation was necessary to help the state’s employers survive an oil price crash and coronavirus restrictions that have roiled the economy. The oil industry has been hampered by a crashing oil price because of weakened global demand and a price war between major producers Russia and Saudi Arabia.
Devillier, who is pushing a measure to cut severance taxes on oil from 12.5% to 8.5% by 2029, said he filed his bill when oil was trading at $57 a barrel. But with prices plummeting, and trading in the $30s a barrel range Monday, Devillier said the measure is needed as a lifeline to the oil and gas industry. In line with Republican orthodoxy on taxes, he also suggested the tax cuts would pay for themselves with increased economic activity.
Gifford Briggs, president of the Louisiana Oil and Gas Association, said the organization would rather such tax cuts take place “faster and more aggressively.” But given the hit to the state budget, he called it the “best path forward.”
Opponents argue the state is in no position to cut taxes as the virus blows a hole in the state budget. Edwards’ administration has presented proposed changes to the budget to lawmakers that includes relatively modest cuts and robust use of a $1.8 billion aid package sent to Louisiana through a $2 trillion stimulus package passed by Congress.
Democratic lawmakers raised questions about how the state could afford to pay for such a tax cut when revenues are already dwindling, as well as whether the tax cuts would ultimately benefit employees. Louisiana Revenue Secretary Kimberly Robinson said the idea that the tax cuts will pay for themselves was “highly speculative.”
Edwards in late April directed Robinson to delay the collection of severance taxes, the bulk of which come from oil, gas and timber. The taxes due on April 25th are now due June 25th, Robinson said. Severance taxes usually bring in about $40 million a month in revenues for the state, and in fiscal year 2019 the state hauled in $529 million in severance taxes.
Voting for suspending franchise taxes (72): Speaker Schexnayder, Reps Amedee, Bacala, Bagley, Beaullieu, Bishop, Bourriaque, Brass, Brown, Butler, Carrier, Coussan, Cox, Crews, Davis, Deshotel, DeVillier, DuBuisson, Dwight, Echols, Edmonds, Edmonston, Emerson, Farnum, Firment, Fontenot, Freiberg, Frieman, Gadberry, Garofalo, Goudeau, Harris, Henry, Hilferty, Hodges, Horton, Huval, Illg, M. Johnson, Kerner, LaCombe, Mack, Magee, Marino, McCormick, McFarland, McKnight, McMahen, Miguez, G. Miller, Mincey, Moore, Muscarello, Nelson, C. Owen, R. Owen, Pierre, Pressly, Riser, Romero, Schamerhorn, Seabaugh, Stefanski, Tarver, Thomas, Thompson, Turner, Villio, Wheat, White, Wright and Zeringue.
Voting against HCR66 (24): Reps. Adams, Carpenter, G. Carter, R. Carter, Cormier, Duplessis, Freeman, Gaines, Green, Hughes, Ivey, Jefferson, Jenkins, T. Johnson, Jordan, Landry, Larvadain, Lyons, Marcelle, D. Miller, Newell, Phelps, Selders and Willard.
Not Voting (9): Reps. Bryant, W. Carter, Glover, Hollis, James, Jones, St. Blanc and Stagni.