Louisiana gives away nearly $1 billion a year from dozens of sales tax exemptions without state officials knowing the cost for each one.
State senators got that surprising and dismaying news Monday when their tax committee began a weekslong process to examine all of the various tax breaks one by one.
Senators got stymied when Department of Revenue staffers said they did not know the cost of several tax breaks.
“It’s embarrassing we can’t say how much we spent” per tax exemption, said Sen. Karen Carter Peterson, D-New Orleans, in comments echoed by her colleagues.
They will know soon, however, because Revenue Secretary Kimberly Robinson ended the committee hearing by telling them that her agency has already begun to redraft the sales tax return to capture that information.
The new sales tax return will require retailers to report the cost for each sales tax exemption granted under state law. Until now, the Revenue Department has required them to report that cost only for the bigger sales tax exemptions and not for 93 others. Instead, the total cost for those 93 tax breaks is grouped under the “Other” category, at a cost of $920 million during the current fiscal year.
“It’s not an insubstantial amount of money,” state Sen. J.P. Morrell, who chairs the Revenue & Fiscal Affairs Committee, told Robinson as he applauded her move to change the sales tax return to identify the cost of each exemption.
In an interview afterward, Morrell, D-New Orleans, said that without knowing the cost of each tax break, legislators cannot know whether it creates enough jobs and tax revenue to offset the money that it costs the state.
That is the task that Morrell has given his committee — to try to figure out which of the 400 or so tax exemptions are beneficial and which can be eliminated.
He and his committee members got a reminder that behind nearly every tax break is a group that will fight to keep it.
“This is one of the good credits,” Randy Hayden, executive director of the Louisiana Propane Gas Association, told the committee when he began his defense of a sales tax exemption for converting vehicles to certain kinds of alternative fuels.
Awarding up to $1,500 to cover the cost of the conversion is costing the state $5 million this year, according to the Revenue Department.
An official from the Louisiana Office of Tourism defended the sales tax exemption on the purchase of original artwork, saying it helps bring foreign visitors to downtowns across the state. This was one of the tax breaks, grouped under “Other,” where the Revenue Department didn’t know the cost.
The Shreveport airport director told committee members that the sales tax exemption on the purchase of “antique airplanes held by private collectors and not used for commercial purposes” was vital to his airport and region.
If it was eliminated, “General aviation pilots will relocate their aircraft to Texas,” said Henry Thompson, the Shreveport airport director. Airplanes older than 1990 qualify as “ancient.”
An official representing the Industry Council for Tangible Assets warned against eliminating the exemption on the purchase of rare coins and precious metals. He provided a study reporting that Louisiana would lose almost $1 million in tax revenue by getting rid of the tax break because doing so would cause 40 coin dealers to close and cost 116 workers their jobs.
However, state Sen. Troy Carter, D-New Orleans, pushed back. He said that eliminating sales tax exemptions would generate money for the state to use to keep from closing hospital beds and laying off workers.
Morrell is asking his committee to review all of the tax breaks in advance of the expected push next year for tax reform, which generally means broadening the tax base by eliminating tax credits, exclusions and exemptions.
“This is not the sexiest stuff at all,” Morrell said after his committee met.
Indeed, it was so unsexy that of the 11 committee members, three of them skipped the hearing entirely but then attended the full Senate session that followed. They were: Sen. John R. Smith, R-Leesville; Sen. Eddie Lambert, R-Prairieville; and Sen. Troy Brown, D-Napoleonville.
Staying for only half the committee hearing were Sen. Neil Riser, R-Columbia, and Sen. Gary Smith, D-Norco.
“It’s always disappointing when you don’t have a full committee,” Morrell said afterward.
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