By Katie Gagliano and Matt Houston, LSU Manship School News Service
BATON ROUGE – There are 12 Republicans and only seven Democrats on the House Ways and Means Committee.
But the Republicans are too divided to pass any revenue-raising bills without help from the Democrats, and that has given the Legislative Black Caucus significant leverage in the negotiations over how to resolve a projected $1 billion budget shortfall.
That is also why, after two days of a special legislative session that had seemed deceptively promising, negotiations in the House Ways and Means Committee stalled Wednesday morning and sent the Legislature into gridlock.
It appeared the Legislature was warming to an unusually swift compromise that would have partially extended the expiring penny of sales tax, favored by Republicans, and reduced the amount of federal itemized deductions residents can claim on state taxes, favored by the Black Caucus and other Democrats.
Any tax legislation that could help deal with the fiscal cliff has to first clear the Ways and Means Committee, but its Republican members are divided over the possible solutions.
Some do not want to approve any bill that limits the state deduction for the itemized federal deductions, which is taken mainly by a subset of wealthier taxpayers. Other Republicans oppose any new taxes, including the extension of even a quarter of the penny sales tax that is set to expire this summer.
“You saw today that [the Republicans] are largely divided because they couldn’t even get their own bill out,” Rep. Ted James, D-Baton Rouge and the vice chairman-elect of the Legislative Black Caucus, said. “They started to put themselves in a real bad spot because I know some of their members want those Medicaid changes but they don’t want to vote for a penny.”
Caucus members and other Democrats oppose extending any portion of the sales tax because they say it will disproportionately hurt the poor. Caucus members also said they supported a proposal by Gov. John Bel Edwards to cut in half the amount of itemized federal deductions taxpayers can claim on state taxes as a way to spread extra tax burden to wealthier taxpayers.
House Speaker Taylor Barras, R-New Iberia, said in an interview Wednesday night that House Republicans made it clear for months that support for change in personal income tax measures, like the itemized deductions, was a non-starter given that federal tax cuts were already increasing many residents’ state tax burden.
“That insistence that this was some kind of package was a misunderstanding that we didn’t hear about until this morning, and we were clear that we’re not supporting personal income tax measures,” Barras said.
This stalemate came on the same day that state leaders learned that the budget hole might not be as deep as they had expected. The state’s chief economist, Greg Albrecht, told the Manship School News Service that updated state sales tax projections showed recent federal tax cuts could produce a windfall of $302 million in state tax collections, up from initial estimates of $226 million.
The changes will lower the federal tax bills for many Louisiana residents, thus lowering the deductions they can take on their state returns and increasing the amount they owe the state. Albrecht said the bump-up in the estimate stemmed from analysis of more recent tax filings and additional revisions.
The essentially $76 million adjustment means that Edwards and the Legislature will only have to replace about $700 million in revenue when the penny sales tax expires if they want to avoid cutting in-state services.
Retaining just 25 percent of the penny of additional sales tax would generate $220 million of revenue in the coming fiscal year. State officials said that cutting the deduction for the itemized federal deductions in half would raise about $100 million in revenue for the state.
Sensing divided Republican support, Democrats blocked a key revenue-raising bill at the committee meeting Wednesday and sent House leadership back into negotiations.
The House Bill 23, by Stephen Dwight, R-Gonzales, would have permanently extended that 25 percent of the expiring fifth penny of the state sales tax and streamlined exemptions so that they apply to each penny in the same way.
The bill had the potential to move to the House floor until Rep. Clay Schexnayder, R-Lake Charles, attached an amendment that married HB23 to seven Republican-backed reform bills. The reform bills include provisions for Medicaid work requirements, non-emergency room visit co-pays, and the “Louisiana Checkbook” government spending transparency website.
James, the vice chairman-elect of the Black Caucus, blocked the amended bill from advancing, recognizing its movement to the House floor would kill any chance to negotiate income tax changes.
“I get political games, but I’ve been here long enough to know when I see one being played,” James said. “At this point the Republicans have said we want our whole package done and we want it done on this one bill. We can’t get in the process of operating like that.”
The committee deferred all other revenue-raising bills under consideration after HB23 stalled.
“I think that without this bill the session is over,” Dwight told the committee. “I hate to be in this position, but this will not be a successful special session without this bill.”
Even though the Republicans outnumber the Democrats on the committee, Dwight acknowledged that he needs help from the Legislative Black Caucus members.
“It’s difficult, because I need the caucus members to get it out of committee,” Dwight said. “Without them, I can’t get it out.”
Barras said he felt the bill could make it to the floor without Democratic support, but reaching 70 votes for House passage might be a challenge. He said he was optimistic before this morning’s events, but the stalemate is creating uncertainty among the Republicans.
Dwight said he was open to stripping Schexnayder’s amendment from his bill if it would get the measure out of committee. Barras said the amendment is key to maintaining Republican support for the revenue-raising bill, but if one of the tied bills fails in committee or the Senate they’ll amend the bill appropriately to ensure the sales tax bill is preserved.
Edwards met with James late Wednesday, and negotiations continued behind the scenes as the governor and the speaker worked to see if they could still make a deal.
Barras said in the interview that if the Ways and Means Committee decides to reconsider the bill this week, it will convene Friday morning.
“We had some other reforms that came out of committee yesterday, so not all lost, and we knew the revenue debate would take some time to get through,” he said. “We still have several days left of the session, and I think the negotiations will continue.”
Sarah Gamard contributed to this report.