Republicans on Tuesday shredded Gov. John Bel Edwards’ plan to raise individual income taxes, forcing the Democratic governor on the first full day of the special session to regroup to try to raise enough revenue to fill what he says is a $600 million budget shortfall.
Republican opposition bottled up three of Edwards’ individual income tax measures in the House Ways and Means Committee — the first hurdle to passing tax legislation. Together, the measures would raise $508 million. Had the bills come to a vote, the panel appeared likely to kill all three of them.
The committee defeated a fourth bill sought by Edwards that would have raised $4 million by trimming some corporate tax breaks.
Edwards did win several victories. The committee approved three other tax measures he sought that would raise $222 million next year. Those measures are scheduled to be heard by the full House on Thursday. The biggest revenue-generator would raise taxes on HMOs, although it seems likely insurance providers would pass along the tax to consumers.
The Ways and Means Committee meets again Wednesday morning, and Kimberly Robinson, the secretary of Revenue who is the administration’s point person on taxes, said they would try again on the bills that the committee didn’t advance.
“We’re not finished,” Robinson said in an interview as Tuesday’s meeting neared its end.
Indeed, shortly afterward, two committee members who seemed open to changing income tax laws as part of a broader package — state Rep. Julie Stokes, R-Kenner, and state Rep. Barry Ivey, R-Central — met with Edwards.
Stokes wants to put on the November ballot a measure that would allow voters to eliminate the benefit that allows them to deduct on their state taxes what they pay in federal income taxes. Stokes wants to eliminate this deduction as part of a wide-ranging plan to reduce income tax rates.
Measures by Stokes to do this — which the Edwards administration has resisted — are now on Wednesday’s Ways and Means Committee agenda.
“Me and Stokes have been trying to see if we can come up with a broader reform package that can win the support of members,” Ivey said afterward. “I don’t think he [the governor] was opposed to anything we were discussing.”
Because of a measure approved during the first special session, voters already will have the chance in November to eliminate the deduction that corporations get on their federal tax payments. If corporations lose that tax break, they would get lower tax rates in exchange.
The Edwards administration declined to discuss its thinking Tuesday night.
The governor wants to approve $600 million in taxes to prevent cuts to the TOPS scholarship program, K-12 schools, public colleges and universities, safety net hospitals and the state prison system. Edwards has made this pitch in private meetings with lawmakers in recent days and again in a joint address to the House and Senate on Tuesday morning.
But the governor ran into a wall of opposition among Republicans on the Ways and Means Committee to his proposals that would raise individual income taxes by taking away tax deductions or by changing tax brackets.
Republicans used their 12-7 majority on the committee to keep those tax measures from advancing.
All three of them would have hit upper- and middle-income taxpayers in the pocketbook, in a state where the poor pay a higher percentage of their income in taxes.
Not advancing was House Bill 11. It would limit the deduction on state income taxes that individuals can claim from the itemized deductions they take on their federal tax returns that are in excess of the federal standard deduction. Under the proposal by state Rep. Rob Shadoin, R-Ruston, taxpayers would be allowed to take 57.5 percent of the deduction, instead of 100 percent today. The change would raise $116 million.
A study by the Institute for Taxation and Economic Policy, a Washington, D.C.-based group, shows that taxpayers who earn more than $103,000 would shoulder 76 percent of the tax increase.
Also not advancing was House Bill 15. It would eliminate 50 percent of the capital gains tax deduction. Robinson said $42 million of the $45 million is claimed by taxpayers who earn at least $500,000 a year. Taking half of the tax break next year would raise $13 million. The Ways and Means Committee voted on an identical measure to HB15 and defeated it, 11-7, but kept alive HB15, which is sponsored by state Rep. Malinda White, D-Bogalusa.
A 2015 study by three prominent economists — Jim Richardson from LSU and Steven Sheffrin and James Alm from Tulane — recommended eliminating both tax breaks while lowering tax rates.
The third bill that remained in committee was House Bill 40. It would tax individuals at the 6 percent rate beginning at $30,000 of income compared with $50,000 today. Sponsored by state Rep. Gene Reynolds, D-Minden, it would raise $388 million per year.
The committee room was filled with lobbyists Tuesday, but they prefer to talk with lawmakers outside of the spotlight. So despite the controversial nature of the bills, few people sought to speak to the committee members.
One of them was Ross Little Jr., a banker from Lafayette who holds a senior position in the Republican Party as its national committeeman on the Republican National Committee.
“Now is not the time to raise taxes,” Little told the committee. “Our businesses are hurting, and our families are hurting.”
Of the three tax measures approved by the committee, the biggest, House Bill 35, would raise the tax on HMOs from 2.25 percent to 5.5 percent. Approved without objection, it would raise $155 million and an additional $34 million under the Medicaid expansion plan that Edwards has enacted. This measure, sponsored by state Rep. Andy Anders, D-Vidalia, would have to win approval from a federal health agency, which is expected.
Ways and Means also approved House Bill 29 without objection. It would limit the interest the state pays on refunds for tax overpayments. Sponsored by state Rep. Ed Price, D-Gonzales, it would raise $16 million.
The third measure approved by Ways and Means came on a 9-8 vote. House Bill 25, sponsored by state Rep. Rodney Lyons, D-Harvey, would reduce the tax credit on Citizens Property Insurance from 72 percent to 25 percent. The change would raise $17 million.
Follow Tyler Bridges on Twitter, @TegBridges.
For more coverage of government and politics, follow our Politics Blog at http://blogs.theadvocate.com/politicsblog/