Almost from the minute last June when the Louisiana Legislature approved raising the state sales tax to 4.45 cents on every dollar spent — it would have been 4 cents — Louisiana Republicans talked about rolling back the increase long before the June 30, 2025 expiration date.
Revenue surpluses, which could be as much as $150 million, were proof enough that “we are extracting too much money out of taxpayer’s pockets, and we ought to look at reducing some of the tax,” House Majority Leader Lance Harris, R-Alexandria, told GOP grassroots luncheons during the fall and winter of 2018.
With only two weeks to go before the regular legislative session starts again on April 8, no lawmaker has picked up the mantel to lower state sales tax rates and thereby undo the deal that broke what House Speaker Taylor Barras called an “extreme deadlock.”
Harris last week described the idea as important to some representatives, but the House Republican Caucus, which met the previous week, didn’t include rolling back the additional .45 cent of sales tax as one of the majority’s goals for the upcoming session.
“I know members have been talking, but I haven’t heard if anyone is filing a bill,” House Appropriations Cameron Henry, R-Metairie said last week. He is in charge of the committee that has first crack at the state budget, but Henry was one of the prominent GOP leaders talking last year about this year pushing the 4.45 rate back to 4 cents. Any tax measure would go to the House Ways & Means committee first.
“If the economy is doing as well as the governor says it is, you’d logically want to roll back the sales tax,” Henry said.
Only four measures so far have been filed, and all of them just fiddle with the edges of the new sales tax.
One measure filed by a Republican, House Bill 60, would bring back the holiday where consumers can buy guns and hunting gear without paying state sales taxes, which took about $404,000 out of the state treasury. Another filed by a Democrat, House Bill 88, would reinstate the August holiday that forgives state sales taxes on several items but is mostly used to purchase school supplies. It costs the state about $1.2 million. And a third, House Bill 58, would do both.
Over in the upper chamber, Senate Bill 21 would keep the sales tax at the higher rate but start dedicating some of the money — it would increase each year — to fixing roads and bridges.
Prefiling isn’t finished yet, and such legislation can be introduced later or be attached as an amendment to an existing bill. And for the cynical, a bill rolling back the .45-cent tax increase could be filed for no other reason than to force Democratic Gov. John Bel Edwards, who is running for reelection in October, to strongly come out in favor of keeping a tax.
The problem is that the deal that broke Barras’ extreme deadlock required a complex puzzle of suspended exemptions to allow the state to collect taxes that otherwise would have been forgiven and offset a drop in revenue from approving nearly half a penny in increased sales taxes rather than a full penny. Negotiators ended up suspending 110 of the 204 available tax breaks, including the sales tax holidays. Proponents fought off repeated efforts to save this exemption or that one from suspension, arguing that even minor messing with the components would scuttle the deal and thereby force dramatic cuts to balance the budget.
“This is one of the reasons we have high rates,” said Robert Scott of PAR last week. “We keep chipping way away at little pieces of it. We’re not really doing anybody any favors.”
As head of the Public Affairs Research Council of Louisiana, which studies and promotes tax policies independent of elected officials, Scott has noted a strong effort by the Edwards administration and the state Senate establishment to keep things as they are, at least during an election year, and let the current tax system settle in. After all, the tax is only eight months old, and not enough data has come in to give economists an idea of how well the new tax works.
First, get a feel for how the interplay between the new rates and sales tax collections work, Scott suggested. Then make changes to the overall fiscal system to shore up the state’s annual finances.
“I would be glad to advocate a lot of tax reform for this session, but I don’t see a lot of appetite for that during the election year. Let’s stabilize and see what we’ve already done first,” Scott said.