People and businesses tired of state lawmakers meddling with Louisiana’s tax structure, threatening their tax breaks and creating financial uncertainty will only get a short-term reprieve when the House and Senate wrap up their work in the special session on taxes.
Gov. John Bel Edwards and the Louisiana Legislature are planning debate over a widespread tax system overhaul for the 2017 legislative session, and they’ve created such a fiscal cliff that they’re backed into a corner to do it.
With the state awash in red ink and facing its worst budget woes in nearly 30 years, the Democratic governor has called lawmakers into two special sessions aimed at raising taxes and scaling back tax break programs to help close gaps in Louisiana’s state operating budget. The most recent session, an 18-day one, must end Thursday.
In that first session, approved tax hikes are expected to raise more than $1.2 billion for next year’s budget. Lawmakers agreed to a 1-cent state sales tax, removed some sales tax breaks, raised taxes on cigarettes and alcohol, charged a new tax on hotel rooms booked through short-term rental sites and lessened business tax breaks.
In the current second special session, both the House and Senate have agreed to at least $200 million-plus in tax changes, supporting a tax on health organizations known as HMOs and shrinking a modest tax credit homeowners receive. The two sides continue to haggle over other tax possibilities.
But while some tax changes were made permanent, the governor and lawmakers made the two biggest-ticket items in the first special session — the 1-cent state sales tax increase and the removal of some sales tax breaks — temporary. More than $1.1 billion raised annually from sales taxes are set to expire in two years, leaving a massive hole in state coffers.
On top of that, bills enacted by lawmakers in 2015 and signed by then-Gov. Bobby Jindal to shrink an array of business subsidies across the board expire in June 2018. Millions of dollars in increased tax break costs are slated to kick back in with that expiration date.
In other words, Edwards, the House and the Senate have another looming financial crisis of their own making on the horizon for the 2018-19 budget year.
The aim, they say, was to get the state enough money to keep government running and services operating while they embark upon a broader discussion of how Louisiana’s tax system should look, to be fairer to families and businesses rather than favoring a few with special carve-outs and tax breaks.
Edwards pledged “long-term, comprehensive tax reform that we will tackle in April 2017” to offer more equality for taxpayers and more stability for the state budget.
“The people of Louisiana shouldn’t have to be here year after year pleading for quality, affordable education or begging that life-saving (health programs) and critical Medicaid services are preserved,” the governor told lawmakers.
As lawmakers sift through tax proposals in the special session, they regularly reference the goal of a broader conversation about taxes and improvements to the state’s financial policy next year.
“I’m not voting for any taxes unless it’s included in a comprehensive tax reform and spending reform package,” said Rep. Lance Harris, the head of the House Republican Delegation. “I think a lot of our members feel the same way.”
A study group created by the Legislature is combing through ideas now, packed with economists and business leaders working since March on ways to improve state budgeting and tax policy. The task force report is due in September and is expected to jumpstart negotiations for the 2017 legislative session.
But while lawmakers can generally agree that the state’s tax structure needs significant improvement, that’s not an easy goal to achieve. Rewriting tax laws involves picking winners and losers, running afoul of special interest groups and taking away favored status for some taxpayers.
As lawmakers ready to end months of contentious tax and budget debates, they’ve set themselves up for another round next year, with taxpayers again uncertain about their future costs and benefits.
Melinda Deslatte covers Louisiana politics for The Associated Press.