Measures that would raise money – and give the Louisiana Legislature ways to address a huge budget deficit next year – advanced to the House floor after the Ways and Means Committee approved a series of bills Monday without objection.
The committee also passed a major rewrite of Louisiana’s income tax code, also without a recorded vote, as the committee operated smoothly under a plan devised by its chairman, state Rep. Neil Abramson, D-New Orleans, and Republican House leaders.
The panel’s actions represented the first major tax legislation to win approval in the conservative-dominated tax committee during the regular session and provided the first real indication that the House Republican leadership is willing to have the full chamber consider revenue-raising measures.
The Republican leaders of the Louisiana House have been promising for weeks to offer solutio…
Ways and Means will consider more tax bills on Tuesday, at the half-way point of the 60-day regular session.
The Legislature will have to raise more tax revenue this year to fill next year’s budget gap or slash the budget in ways that few lawmakers seem willing to favor. Within the State Capitol, the looming budget deficit is known as the “fiscal cliff,” when $1.3 billion in temporary taxes will roll off.
In all, Ways and Means passed five tax bills that would raise money within the next two years.
For lawmakers and policy-makers trying to solve the fiscal cliff this year, what mattered most Monday was that Ways and Means gave the full House – and thus the Legislature – legislative vehicles that potentially could be amended later to raise the necessary revenue.
“It gives them flexibility by having some things in play,” Barry Erwin, who is president of the Council for a Better Louisiana, a Baton-Rouge based nonprofit policy group, said in an interview.
The budget approved by the House last week would get the Legislature only half way to heading off the fiscal cliff next year, House leaders have acknowledged.
Any revenue bills that the House passes would advance to the Senate, which is seen as being more favorable to raising more money to pay for government programs and services.
“Allowing the House to have a full debate on revenue measures sends a message to the Senate that they’re giving them due consideration,” state Sen. JP Morrell, D-New Orleans, said in an interview. “We have to have both revenue and spending measures.”
One measure approved Monday, House Bill 609, would raise $196 million to address the fiscal cliff by permanently removing numerous tax exemptions on two cents of the state’s sales tax. The Legislature last year temporarily removed those exemptions for 27 months. State Rep. Jay Morris, R-Monroe, is the sponsor.
“It’s reducing giveaways,” Morris said in an interview afterward. “It will enable us to keep rates low and keep us from raising personal income taxes.”
Kim Robinson, the secretary of the Department of Revenue, voiced concerns about the measure after the committee hearing because it would maintain a sales tax system where different activities are taxed at different rates.
“We are the only state in the Union that taxes all pennies differently,” state Rep. Julie Stokes, R-Kenner, said during the committee hearing. “It’s got to stop.”
Stokes noted that The Tax Foundation, a Washington, D.C.-based nonprofit ranks Louisiana as having the country’s worst sales tax system because of this type of complexity. (It takes the Department of Revenue 25 pages to detail the impact on the various sales tax exemptions.)
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Ways and Means passed another measure, House Bill 355, that would revamp the income tax code by establishing flat individual and corporate income tax rates coupled with eliminating many tax breaks. Sponsored by state Rep. Barry Ivey, R-Central, the bill also would expand the Earned Income Tax Credit, which benefits the poor, and the standard deduction.
HB355 changes the tax system in so many ways that the legislative staff hasn’t been able to certify its overall fiscal impact.
Ivey acknowledged to committee members that HB355 faces an uphill battle to winning approval, given its far-reaching nature. It would need a two-thirds supermajority in the House and the Senate as well as approval of the state’s voters.
The committee also advanced House Bills 651 and 653, by state Rep. Chris Broadwater, R-Hammond, that would, as with Morris’ bill, permanently remove certain tax breaks. The two bills together would raise $29 million to help plug the fiscal cliff.
Besides the sales tax measures on Tuesday, Ways and Means will hear House Bill 648 by state Rep. Kenny Havard, R-St. Francisville. It would replace the state’s corporate taxes with a hybrid tax on profits. Havard pledged to amend the bill for Tuesday to address complaints from legislators about how it would hit certain industries.
Meanwhile, the Senate Revenue & Fiscal Affairs Committee continued to pass legislation sponsored by Morrell on Monday that would force various tax breaks to win approval, after undergoing a review, before continuing. Those bills are now before the full Senate, along with other measures that would curtail tax exemptions.