House committees pass legislation to solve fiscal cliff

By Matt Houston and Drew White, LSU Manship School News Service

BATON ROUGE – As the second week of the 17-day special legislative session begins, House committees on Sunday broke a stalemate, at least temporarily, and approved bills that could help the state avoid major budget cuts when $1 billion of temporary taxes expire this summer.

Several Republicans on the House Ways and Means Committee voted with Democrats to move some of the bills to the floor, where they are likely to face another contentious debate.

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The committee voted 12-5 to move a bill by Rep. Stephen Dwight, R-Lake Charles, that extends one-quarter of a cent of the fifth penny of state sales tax and streamlines certain exemptions to raise about $300 million a year in revenue.

In return for the partial sales tax extension, the committee also advanced, 10-7, a bill by Rep. Walt Leger, D-New Orleans, that would limit some of the deductions for Louisianans who itemize deductions on their federal tax returns. Leger’s bill would raise $79 million.

An amendment by Rep. Alan Seabaugh, R-Shreveport, added a sunset provision to the quarter-of-a-penny extension to the sales tax. It would expire in mid-2021, essentially creating another “fiscal cliff” in three years.

Seabaugh argued that the amendment buys the Legislature time to make more comprehensive tax reforms that could make Louisiana more appealing to business.

“We gave ourselves a couple of years to try and fix the problem, and making [the extension of this tax] permanent is admitting we cannot fix the problem,” Seabaugh said. “I’m not ready to do that, yet.”

Several legislators noted that they have been unable to pass significant fiscal reform in the four special sessions since Governor John Bel Edwards took office in 2015, and they will not have the opportunity to address bigger structural changes in this special session because of procedural limitations.

“In my short five years here – and they’ve been pretty miserable – I’ve learned the Legislature won’t do anything it doesn’t have to do,” Rep. Barry Ivey, R-Baton Rouge, said. “In the last two years, we won’t even do that.”

He said he opposed the compromises approved on Sunday because “once we kick the can on revenue, there is no need for structural reform.”

House Democrats have consistently argued the extension of the sales tax disproportionately affects poor people, and lobbied for the limits on the itemized deductions as a means for spreading the burden to wealthier Louisianans.

Republican representatives in favor of Leger’s measure to limit the deductions were Hammond’s Julie Stokes, Lake Charles’s Stephen Dwight, Oil City’s Jim Morris and Hammond’s Chris Broadwater.

Seabaugh argued that the bills “seems like an attempt by the state to take back more of the savings coming from the federal tax change.”

Leger retorted that the federal tax cut is not permanent, and noted that the Legislature, including Seabaugh, had voted down several options to divorce state and federal tax policy in previous sessions.

Another Seabaugh amendment married both bills to the passage of six other Republican-backed bills, including bills that would cap government spending, establish the “Louisiana Checkbook” government transparency website and make changes in Medicaid.

One of the Medicaid bills, sponsored by Rep. Frank Hoffmann, R-West Monroe, would have instituted work requirements for Medicaid recipients in Louisiana. But amendments in the House Health and Welfare Committee on Sunday stripped the bill of its teeth to the point where finding a job is more of a suggestion.

Democrats opposed the bill out of concern that Medicaid recipients could lose health coverage if they lost their jobs. The committee then approved an amendment by Rep. Marcus Hunter, D-Monroe, guaranteeing that no Louisiana Medicaid recipients will lose coverage because of the bill. 

Setting up a system to ensure that Medicaid recipients were working also would have cost about $80 million.

The House Ways and Means Committee also moved legislation Sunday that would lower rebate rates for the Competitive Projects Payroll Incentive Program, and another bill that makes permanent the elimination of certain corporate income tax deductions.

Combined, those two measures would save the state an additional $30 million, bringing the total for the bills passed today to about $409 million.

The state also will collect an extra $302 million in tax thanks to the federal tax cuts. Those cuts also will reduce the value of the federal-tax deductions on Louisiana residents’ returns, thus increasing their state tax bills.

Tryfon Boukouvidis and Sarah Gamard contributed to this report.