Thursday, June 20, 2024

In tax negotiations, Gov. Edwards rejects sales tax renewal

by BIZ. Staff

By MELINDA DESLATTE, Associated Press

BATON ROUGE, La. (AP) — Gov. John Bel Edwards says he’s flexible on tax ideas to close a $1 billion budget gap and stave off deep cuts to services, except for one proposal: a long-term renewal of the 1 percent sales tax whose expiration is creating most of the shortfall.

For Republican lawmakers willing to vote for taxes, Edwards appears to be taking one of the most significant revenue-raising measures off the table, even though it’s something they could possibly support.

“It’s likely that will be a proposition put in front of him,” said Rep. Thomas Carmody, a Shreveport Republican who said he’d consider renewal of part of the sales tax.

Edwards, a Democrat, said the temporary sales tax was planned as a bridge to a larger rewrite of Louisiana’s tax laws, which hasn’t happened. He said the tax hike more heavily hits the poor and a task force of Louisiana economists and tax experts considers it bad policy out of step with other states.

“It disproportionately penalizes the most vulnerable citizens. It’s regressive in nature, but from an economic perspective, it doesn’t align with where Louisiana’s economy is going,” Edwards spokesman Richard Carbo said in a statement.

Lawmakers two years ago voted to raise Louisiana’s 4-cent state sales tax by another penny for every dollar spent, part of a package of taxes to fill budget holes. Shoppers started paying the higher rate in April 2016.

That sales tax increase and other temporary taxes expire July 1.

Edwards and lawmakers are negotiating over replacement options to avoid heavy cuts to health and education programs. Taxes would require a special session to pass. Most tax bills must start in the House, where GOP leaders blocked Edwards’ previous tax proposals, so the governor said he won’t call that special session without agreement from House Republicans.

But for Edwards, renewal of the sales tax is off the table.

The 1 percent temporary tax hike raises an estimated $880 million a year. It’s also brought Louisiana an unpleasant distinction, as the state that charges its consumers the highest combined state and local sales tax in the nation, averaging slightly more than 10 percent.

Instead of sales tax renewal, Edwards wants to permanently remove exemptions for purchases that usually aren’t subject to sales tax, and to extend the permanent 4 percent state sales tax to services, such as cable television and online streaming services.

“A broader sales tax base with a lower rate and few exemptions would more closely reflect where Louisiana’s economy is going and put us on par with our neighboring states,” Carbo said.

Even if Edwards would consider sales tax renewal, Democratic lawmakers say they won’t back the idea. Democrats hold 41 of 105 House seats. A two-thirds tax vote can’t succeed without some Democrats in support.

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