If the Louisiana Legislature has a Don Quixote, he is Baton Rouge Rep. Steve Carter.
He challenged in 2017 his Republican bosses to pursue a 17-cent increase in the gasoline tax. Supported by a business community wanting to ease traffic tie-ups that hinder commerce, Carter fought the good fight before announcing, “We don’t have the votes.”
Now, coming into his final session as a term-limited representative, Carter wants to fight the state homestead exemption, which has been politically untouchable since enacted in 1934.
“I know it’s a sacred cow. But unless you put it out there, you’ll never know what you can do,” Carter said.
He wants local governments to have more say-so over a state break from the property taxes that fund local services.
The Louisiana Constitution forgives 10 percent of the fair market value of a taxpayer’s primary home, up to $75,000 of the assessment for property taxes. For nearly a third of the homeowners that means no property tax bills at all. For people with homes worth more, say $200,000, they pay as if their property is worth $125,000. The amount a taxpayer can save varies depending on the millage rates of a jurisdiction, but the average is about $750 to $800 per year.
Homestead exemptions were granted on about $7.3 billion in property in 2018, according to the state Tax Commission.
Of the 1.2 million homesteads that receive the exemption 398,794 homes, about 34 percent statewide, paid no property taxes at all in 2018. More than half of the homes in 28 of the state’s 64 parishes paid no property taxes with 10 of those parishes having 72 percent or more of their homes totally exempted.
While any legislation fussing with the homestead exemption usually would be considered a political nonstarter, Carter’s bill may have a chance because of debate over how much local input should be allowed in the state's Industrial Tax Exemption Program, which gives manufacturers a break on local property taxes.
Two Baton Rouge Republicans — Sen. Bodi White and Rep. Franklin Foil — are filing legislation to roll back ITEP regulations to the way things used to be — the state deciding, the locals accepting and the corporations smiling. Foil and Carter may meet on the campaign trail this fall if Carter joins Foil in a run for the state Senate.
But lawmakers made a key distinction between the two tax breaks at their legal birth during the Great Depression in the 1930s. Homestead exemptions are in the Constitution as an entitlement, meaning own a home, get an exemption. ITEP is set up as a more discretionary program for which corporations must apply, meet certain criteria and be approved.
“I’m only trying to help the locals,” Carter said of his House Bill 12. “Whenever they need something, they have to come to us (the Legislature) for permission. Instead of them coming to us all the time, why don’t we give them the opportunity to generate some revenues from their own communities.”
HB12 essentially asks voters to change the Constitution to allow parish governing authorities to alter the amount of the Homestead Exemption in their jurisdiction. Local voters can’t vote to increase the exemption but if they vote a lower level, millages — the percentage rates per $1,000 of property value used to calculate local property taxes — also would have to be reduced to ensure no increase in revenue.
Dannie P. Garrett III, a Baton Rouge lawyer who represents some school taxing districts, points out the bill, if it becomes law as written, would expose more homeowners to higher property taxes, but commercial property owners who would see their overall taxes decrease because of lower millages. The HB12 language wouldn’t create new income, rather it would rearrange the source of income, he said, which may be just fine for businesses. Every penny a homeowner saves from the homestead exemption is covered by increased millages that fall primarily on commercial interests.
Louisiana has a stunningly complex tax system that is often criticized by Wall Street for giving away too much money through myriad tax breaks.
Robert Travis Scott, the head of the Public Affairs Research Council of Louisiana, the policy think tank known as PAR, wants to know Carter’s goal: Is it to get more revenue from people not paying now? Or is it to change the state’s fiscal structure?
In most states, property taxes support schools and other local services. In Louisiana and much of the Deep South, the less stable sales taxes are the source.
Local governments in other states have much more autonomy than in Louisiana, where Carter rightly says local officials routinely must come to Baton Rouge on bended knee.
“The question is: Where should you place the homestead exemption in the overall (tax) scheme? To my thinking that’s the more productive conversation,” Scott said.