The Louisiana House approved a small tax increase on alcohol Sunday while Gov. John Bel Edwards and lawmakers engaged in high-stakes negotiations to try to find agreement to raise enough other taxes to fill a shortfall that is threatening the cancellation of university classes and a reduction in state health care for the poor.
Time is running short because the 25-day special session — called by the governor to solve the budget crisis — ends Wednesday night at 6 p.m.
“The worst thing we can do would be to leave here and not address the problems facing Louisiana,” said state Rep. Rob Shadoin, R-Ruston, shortly before the House adjourned at 9:48 p.m.
Much of the behind-the-scenes negotiating is focused on a measure pushed by business lobbyists and Republicans in the House that surfaced on Friday. It would add an extra half penny or so to the state sales tax beyond the 1 cent that both the House and Senate have already approved. It would be in effect for two to four years, House Speaker Taylor Barras, R-New Iberia, said in an interview.
An additional 0.6-cent increase in the sales tax would raise enough to fill what Edwards says is a $147 million gap based on the tax and spending measures that the House and Senate appear likely to approve before the special session ends. (The full penny already approved by each chamber would raise $210 million this year.)
But Edwards told reporters Sunday night that he doesn’t favor going beyond the 1-cent sales tax increase because it hits the poor the hardest. He signaled, however, that he might support it if lawmakers approve higher taxes on businesses that business lobbyists have been opposing.
“I am not open to it until there is due consideration of all measures,” he said. “It has to be shared sacrifice.”
Edwards also called for approval of measures that would make middle- and upper-income people pay higher income taxes.
One potential measure would eliminate exemptions that businesses get on their sales taxes when they pay their utility bills. The proposal would remove the exemption on two of the four state tax cents and raise $30 million this year toward the $147 million gap and $119 million next year when the Legislature is facing a $2 billion deficit.
The House also failed to approve a measure, House Bill 61, which would have scrubbed sales tax exemptions from one of the four pennies. The vote was 66-32, but it, too, needed 70 votes.
Edwards also said any sales tax increase should include the purchase of machinery and equipment used for manufacturing. The 1-cent tax approved by the Legislature carves out that exemption for businesses, at a cost of $4.7 million this year and $18.8 million next year.
Adding an extra 0.6 percent to the sales tax — or a slightly higher or lower amount — would require 70 votes in the House and 26 in the 39-member Senate.
State Rep. Gene Reynolds, of Minden, who heads the House Democratic Caucus, said Democrats remain skeptical of the extra sales tax increase. That would have to change to pass it because, with 20 Republicans opposing every tax bill, the measure would require the support of most Democrats.
Some Republicans who voted for the 1-cent sales tax are skeptical of making it higher.
“I don’t think there’s any way my district will support that,” state Rep. Tanner Magee, R-Houma, said in an interview. “All I’m hearing is that business hasn’t played its part yet.”
Local government officials fear that the higher sales tax would make it harder for them to get voter approval to raise those taxes.
Besides the tax increases, the Legislature and Edwards have cut $60 million from the budget, and the governor is making another $66 million in cuts by not providing money for a number of programs.
One tax measure approved by the House on Sunday would hit consumers more when they buy alcohol. Buying a beer beginning April 1 would cost nearly a penny more while the cost of a glass of wine and a shot of liquor would rise by one or two cents.
HB27 now goes to the Senate for consideration.
Raising the alcohol taxes would produce $4.4 million for the current year fiscal deficit and $19 million for next year’s.
The tax on beer was last raised in 1948 when Harry Truman was president, while liquor last went up in 1978 when President Jimmy Carter held the office. It’s not clear when the tax on wine was increased last.
The Beer Industry League has said Louisiana has the 14th highest beer tax rate in the nation.
The House rejected, 44-54, an amendment that would have limited the alcohol tax to three years.
Meanwhile, the state Senate on Sunday night advanced a constitutional amendment that would eliminate a federal income tax deduction for corporations filing state income taxes. The measure would be on the ballot for voters statewide in the fall.
If the measure passes, the state corporate tax rate, which ranges from 4 to 8 percent, would become a flat 6.5 percent. House Bill 95, by Rep. Walt Leger III, D-New Orleans, would raise $30 million more once it takes effect.
It was originally written to eliminate the deduction for both personal and corporate income taxes, which would have affected businesses and individual taxpayers alike. But the bill was amended to affect only corporate filers.
Currently, when individuals and corporations file their state income taxes every year they can deduct 100 percent of what they pay in federal income taxes.
The bill is heading back to the House for approval of technical amendments that Leger said will win easy approval.
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