The Louisiana House tax panel on Monday raised little money to address the state’s gaping budget hole next year, instead creating or extending 15 different tax exemptions that would cost the treasury millions of dollars a year.
One measure approved by the House Ways and Means Committee, promoted by investment firms based in New Orleans and Baton Rouge to create jobs in rural areas, would cost the state $30 million a year beginning in 2023.
The various tax exemptions, if ultimately approved by the Legislature, not only would worsen the state’s budget problems but also would move Louisiana’s tax system away from what a legislative-created blue-ribbon task force recommended in January – that lawmakers ought to end tax breaks so they could lower tax rates.
The votes came a day before the full House, for the first time during the legislative session, will indicate its appetite for raising revenue to offset the loss of $1.3 billion in temporary taxes that will roll off next year. It is known inside the state Capitol as the “fiscal cliff.”
The House will consider two major tax bills forwarded to the full chamber by Ways and Means one week ago.
House Bill 355 by state Rep. Barry Ivey, R-Central, would rewrite the state’s tax system. In an interview, Ivey said he believes it would raise some revenue but noted that the legislative fiscal staff has been unable to determine how much.
House Bill 609 by state Rep. Jay Morris, R-Monroe, would extend legislation passed in 2016 that temporarily ended numerous tax exemptions on two cents of the state’s five-cent sales tax. It would raise $198 million a year.
The version of the budget approved by the House recently would address about half of the $1.3 billion fiscal cliff by clamping down on spending programs – principally health care for the poor and disabled. The Senate Finance Committee began hearing testimony on the budget, the next step in the legislative process.
Meanwhile, the full Senate is expected to consider legislation Tuesday that would revamp the program that awards tax credits for filming movies and television shows in Louisiana. State Sen. JP Morrell, D-New Orleans, is the sponsor of Senate Bill 254.
Monday was a good day for a host of business lobbyists who filled Ways and Means’ hearing room. By the time the hearing had ended seven hours later, a lengthy list of interests had obtained or won the extension of tax exemptions, including coin dealers, research and development, utilities, sellers of poly pipe, owners of inactive oil wells and sellers of anti-pollution equipment to timber companies.
The hearing room steadily thinned after each interest group won a favorable vote on its tax exemption.
"This is only one of several bills that would injure our state fisc going forward and making our job more difficult,” Morris said at one point. “You know what they say, a million here and a million there and pretty soon you’re talking about real money.”
When told by state Rep. Chris Broadwater, R-Hammond, that this tax break was a good one, Morris replied, “Everybody thinks their crow is the blackest.”
Others who obtained tax exemptions were out-of-state disaster workers, doctors who practice in rural areas and spouses of fire fighters and paramedics killed while on duty.
The bill that would cost the most was House Bill 641 by state Rep. Jack McFarland, R-Winnfield. He said the measure would reinvigorate rural communities by permitting investment firms to act as brokers for private companies that would receive tax credits for their investments.
But McFarland left it to W. Anthony Toups III, the principal of Advantage Capital in New Orleans, to answer questions about the bill. Toups acknowledged that Advantage Capital would seek to benefit from the bill, which he, too, said would create jobs in rural areas.
However, a recent report by Philadelphia-based Pew Charitable Trusts, found that many states “are falling prey to a complex economic development approach, pushed hard by investment firms that stand to benefit, that has failed to live up to its promises.”
One revenue measure approved by Ways and Means would allow local governments to require homeowners to pay property tax on the first $20,000 of market value. House Bill 345 by state Rep. Paula Davis, R-Baton Rouge, would require approval of voters statewide and raise up to $128 million in local property taxes statewide, according to the legislative fiscal staff.
Ways and Means approved one measure that would raise $16 million per year by imposing a tax on wireless phone lines with the money flowing into a fund that assists the deaf. State Rep. Pat Smith, D-Baton Rouge, noted that her measure, House Bill 582, is similar to one killed by Gov. Bobby Jindal.
Ways and Means also approved a measure that will give voters the opportunity to repeal a deduction that individual taxpayers get on their federal tax payments, in exchange for changing the graduated income tax to a single 3.95 percent rate. The changes would be carried out with House Bills 353 and 501. State Rep. Julie Stokes, R-Kenner, the sponsor, said her proposal would be revenue neutral after she amended it in the committee.
Business interests flexed their political muscle Tuesday before the House tax panel, which r…
Stokes’ effort is modeled on one of the recommendations from the tax and budget task force. But a measure promoting another recommendation died. It would extend the sales tax to a number of activities subject to sales taxes in Texas but not Louisiana. State Rep. Gene Reynolds, D-Minden, the sponsor of House Bill 655, said he withdrew the bill without a vote because it had no chance.
Ivey is proposing to revamp the income tax system by establishing flat individual and corporate income tax rates coupled with eliminating many tax breaks. The bill also would expand the Earned Income Tax Credit, which benefits the poor, and the standard deduction.
As with Morris’ bill, Ivey’s needs a supermajority of 70 votes in the House. Ivey called it an “uphill battle” in an interview Monday.