Our Views: Tax increases may cause indigestion on Louisiana's budget menu _lowres

Advocate staff photo by HILARY SCHEINUK -- Louisiana Governor John Bel Edwards speaks during a press conference held to discuss budget options, Tuesday, January 19, 2016, at the Louisiana State Capitol in Baton Rouge, La.

Gov. John Bel Edwards is new as executive chef, but he already knows his first menu is going to cause indigestion.

That’s because of the large amount of tax increases on the “menu of options” for the 2016 Legislature.

Not the menu he’d offer absent dire necessity, Edwards said, but necessary to fill yawning budget gaps that have built up over eight years of former Gov. Bobby Jindal’s administration.

“The days of using budget gimmicks that have allowed us to limp along are over,” Edwards said. “This administration will remove the smoke and mirrors and provide the facts about where we are.”

Where we are isn’t pretty, but where we need to go — at least according to the menu options currently on the table — is where the indigestion comes in.

The long list of budget options is available from the Governor’s Office. It includes the short-term patches to the current year budget, estimated at being $750 million short of money — and the end of the budget year is June 30.

For the next budget year, there’s a huge gap, roughly $1.9 billion.

There will be a series of stopgap measures for the current fiscal year, including tapping the “rainy day” fund and using some money from the BP legal settlement arising from the 2010 Gulf of Mexico oil spill. Edwards’ team emphasized that would be general damages paid to the state, not coastal restoration money, the bulk of the lawsuit settlement.

The plethora of dedicated funds in state government would be trimmed, at least 10 percent. Some of these measures will require legislative approval. There also are some tax increases that would generate money reasonably quickly, including raising the cigarette tax and cutting the state’s tax credits for many types of businesses, including the inventory tax. Business taxes would go up in various ways, either directly or indirectly by cuts in tax breaks.

There’s some indigestion for everybody.

Every tax increase is a negative on the state’s private-sector economy, but many of these changes have been made unavoidable. Edwards can lay responsibility for that all day long on his predecessor.

But a menu of options is not the same thing as an Edwards plan. While the legislative process is in flux right now, there are many ways that the menu can be adjusted and it is not clear to us what is negotiable and what is essential.

Just one item among the main courses that we don’t like: For the current year — and possibly for after that, if the Legislature does not agree to most of the “menu” items — Edwards’ proposed 1-cent increase in the state sales tax, now 4 percent, would make Louisiana’s average combined state and local sales taxes the highest in the nation. Sell that to retailers in our economically depressed oil patch.

We are concerned that the state will revert to the “temporary” sales tax increases that persisted for more than a decade after the financial crisis of a generation ago. But we recognize that menu option is one of the few ways to raise quick money for the current fiscal year, about $200 million.

Making that tax increase truly temporary requires a significant number of tax increases in income and business taxes. But even in a best-case scenario, a three-month increase might lead individuals and businesses to defer major purchases, further slowing economic activity. That’s the last thing Louisiana needs.