While the state Senate and the rest of the House cooled their heels Monday night, Edwards spent an hour in his 4th floor Capitol office negotiating a potential deal with a delegation of Republican and Democratic leaders from the House.
Afterward, House Speaker Taylor Barras said in an interview that he thought the two sides could work out a deal before the special session ends on Wednesday at 6 p.m.
“We have what has been formulated into a proposal to work from,” said Barras, R-New Iberia.
Senate President John Alario said that the Senate could amend House bills to try to raise more money.
“Reasonable people can come together to make it work,” said Alario, R-Westwego.
Edwards is asking that Republicans raise more money by ending tax breaks given for sales taxes and reducing a tax break that benefits upper income taxpayers, and he also wants them to expand a tax break for the poor to offset other taxes that they would have to pay, said state Rep. Lance Harris of Alexandria, the Republican delegation leader.
Harris said Edwards had issued an “ultimatum” on these issues that Republicans could not accept. But Barras said later that the issues remain open for discussion.
“We both went home with homework to do,” Barras said.
Barras said the Republicans have countered with a temporary 0.25 or 0.35 percent increase in the state sales tax, beyond the 1 percent that both chambers have already approved. The 1.25 percent or the 1.35 percent levy would last 15 months and then drop to 1 percent, which would remain in place for another year.
Rep. Cameron Henry, of Metairie and another Republican leader, said a measure sought by Edwards — an expansion of the Earned Income Tax Credit for the poor — would be “counterproductive” because it would cost the state $47 million next year. He said the Legislature needed to raise more revenue, not cut taxes.
Barras said “cooler heads prevailed” to keep the idea under discussion.
The state House approved one measure Monday night that would help close the gap, but the $20 million it would raise this year would leave the Legislature about $125 million short, after Republican votes caused the House to reject another measure that would have reduced a giveaway program for businesses.
Business lobbyists and Republicans in the House are pushing the extra sales tax increase.
“We’re not inclined to do that,” state Rep. Walt Leger, D-New Orleans, said in an interview Monday night, after he joined Barras for an early evening meeting with Edwards. Leger made the comment at 6:30 p.m., just after the House took what was supposed to be a short break, but which continued until 10:30 p.m. The House finally adjourned just before 11 p.m.
If not enough money is raised, Edwards said in a statement Monday night aimed at ratcheting up the pressure on lawmakers, government officials could be forced to send furlough notices to university faculty and staff and to employees at the hospitals.
The LSU Medical School in Shreveport might not be able to make payroll in June, the statement said.
“Unfortunately, we are running out of time and some members of the legislature appear ready to accept the catastrophic cuts that will take place when we adjourn in 48 hours,” Edwards said. “If my plan is not acceptable, it is up to those members to offer an alternative, which has not happened.”
The alternative by Republicans in the House appears to be the 0.35 percent extra sales tax increase.
Edwards and lawmakers are trying to raise taxes and cut spending enough to close the $900 million budget deficit they inherited for this year and the $2 billion deficit for next year, in what is the state’s biggest budget crisis in 25 years. They are attempting to make these changes at a time when their constituents are feeling pinched. Louisiana’s economy appears to have slid into recession, following the sharp drop in oil prices.
Both sides appear to be gearing up to blame the other, if no agreement can be reached.
“It’s going to come down to members deciding whether they want cuts in their districts or approving the extra sales tax,? said state Rep. Gene Reynolds, of Minden and head of the House Democratic Caucus. “That’s what it’s all going to boil down to.”
Up to now, Democrats in the House, who voted in virtual lockstep to pass the 1-cent sales tax, have resisted the extra sales tax increase.
“Hell no!” said Rep. Ted James, D-Baton Rouge, when asked if he would support the additional sales tax. “It’s hard enough to vote for the 1-cent sales tax.”
The sales tax hits the poor hardest since they spend a greater percentage of their income on consumer purchases than do the wealthy. Louisiana’s reliance on the existing sales tax to raise revenue is one of the reasons the state has a regressive tax system, one that takes a bigger bite out of the poor.
Even if Democrats agree to support the extra sales tax hike – which seemed very doubtful Monday night — anti-tax Republicans could sink the plan.
Edwards signaled to reporters Sunday night that he is willing to go beyond the 1-cent sales tax increase if the Legislature agrees to make businesses and higher-income taxpayers pay more.
Leading the charge against higher business taxes has been the Louisiana Association of Business and Industry.
Stephen Waguespack, the group’s president, said LABI had dropped its opposition to several measures that would make businesses pay more.
“We’ll do our part to find a reasonable solution,” Waguespack said.
The House killed a proposal to eliminate 50 percent of the deduction that individual taxpayers get when they itemize deductions on their federal tax returns. The vote on House Bill 33 by Leger was 44-58. The top 15 percent of taxpayers would have paid 76 percent of the higher taxes, according to an analysis by the Institute on Taxation and Economic Policy.
The House also rejected a proposal by James that would reduce the tax credits that corporations get from the state when the pay inventory taxes to local government. The 30-68 vote came after James beseeched his colleagues to approve the measure to prevent cuts to the public universities and hospitals, as well as to the disabled that receive daily home visits from state care givers.
“We’re talking about the thousands of children who will be impacted,” James said.
Minutes later, the House approved a Republican-sponsored measure that would eliminate nearly all of the 200 exemptions to the state sales tax, on one of the four pennies of the existing sales tax.
House Bill 61, by Rep. Jay Morris, R-Monroe, was approved 87-15, a day after the House fell four votes of passing it. The measure approved Monday night would last only three years, which Morris said afterward was added to gain enough votes for passage. The measure goes to the Senate for consideration.
“People are very leery of voting for anything that raises revenue,” Morris said in an interview.
The Legislature has approved a 22-cent increase in cigarette taxes that Edwards will sign into law. But still uncertain are other measures, including one that would slightly increase the tax on alcohol (it’s now before the Senate) and another that would make it harder for businesses to avoid paying taxes in Louisiana (also before the Senate).
That 1-cent increase approved by each chamber is tied up in a conference committee and has yet to win final approval because the House voted to have it end after 18 months while it would last five years under the Senate version.
In another vote, the House approved a constitutional amendment Monday night that would establish a flat 3.8 percent individual tax rate on income earned above $12,500 while eliminating tax breaks that cost state government $2 billion in foregone revenue per year, said the sponsor, state Rep. Julie Stokes, R-Kenner. The measure, which Stokes said was revenue neutral, goes to the Senate.
Follow Tyler Bridges on Twitter, @TegBridges.
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