Thursday, July 18, 2024

Sales tax bill that could stabilize budget sent to Governor

by BIZ. Staff
By Paul Braun and Drew White, LSU Manship School News Service

BATON ROUGE — In a 33-6 vote Sunday, the Senate sent a sales tax bill to Gov. John Bel Edwards that could end the financial instability that has dominated discussions at the Capitol and led to seven special sessions since he took office in 2016.

The bill, which represented a compromise Friday between Edwards and House Republicans, will extend 0.45 of a cent of sales tax that was scheduled to expire on July 1.

That will lower the state’s portion of the sales tax to 4.45 percent from 5 percent now. But by not letting the full penny expire, it will raise $463 million to fully fund TOPS scholarships, higher education and state health services and reduce cuts in other areas. The extra 0.45 of a cent will expire in 2025.

Edwards and House Republican leaders also have grappled for control over the budget process, and the Senate also was working Sunday evening to resolve sticking points with the House over a separate supplementary budget bill.

The Senate tax votes came after months of intense infighting between Edwards, who initially warned that the state faced a $994 million budget shortfall, and House Republican leaders, who want to shrink the size of government, contended that the budget hole was much smaller.

A deal ended up being possible partly because changes in federal tax laws created a windfall in state tax collections, reducing the projected shortfall by nearly a third, and lawmakers agreed to apply tens of millions in damage payments from the BP oil spill to the budget.

In the end, there will still be cuts in the budgets for corrections, juvenile justice and other programs. But most Democrats and Republicans agreed that they were manageable.

Edwards has said that the state was in a $2 billion financial hole when he took over as a result of income-tax cuts by former Governors Kathleen Blanco and Bobby Jindal and Jindal’s expansion of tax exemptions for corporations that the state is still digging out of.

But in opposing the sales tax bill Sunday, Sen. Sharon Hewitt, R-Slidell, argued that taxpayers had been left out of the conversation.

She pointed to the federal tax changes, which lower the value of deductions that wealthier taxpayers can claim on their state returns, and said they would increase the tax burden on Louisiana residents by $350 million. She said the sales tax extensions and other changes would add nearly $500 million more.

“Spoiler alert to the taxpayers – we are raising your taxes another $850 million in this year,” she said.

Hewitt criticized Edwards for expanding the Medicaid program without considering other vital state services and for letting the state budget grow to its highest level.

She also chided both the governor and fellow legislators for not making broader reforms in the state’s tax structure over the last two years, as both sides had talked about doing when they added the temporary extra penny sales tax in 2016.

“As long as we continue to solve long-term expenditure problems with short-term solutions like tax increases, we will never solve our state’s fiscal challenges,” she said.

Sen. J.P. Morrell, D-New Orleans, responded to that, saying: “It boggles my mind that some come down here and talk about taxes like this was the first thing we went to – this was the last line, ladies and gentlemen, we tried everything else.”

“We’ve had several opportunities where this body tried to do tax reform,” he said. “There’s been at least two instances where I’ve had bills that would have saved the state a tremendous amount of money,” he said, but they were killed in the Senate Finance Committee “by some of the same people who are going to vote no today.”

“I challenge everyone: If you don’t like raising taxes, file tax reform bills, pass tax reform bills,” he shouted. “I look forward to the naysayers filing tax reform bills rather than throwing critiques from the peanut gallery cheap seats.”

Sen. Karen Carter Peterson, D-New Orleans, said Hewitt’s comments were “offensive.”

Sen. Norby Chabert, R-Houma, said he liked that the extra sales tax would not expire for several years. “The reason why the budget is so big is that we have so many people in abject poverty,” he said. “We need to grow our economy – our economy’s broken.”

The compromise bill was sponsored by Rep. Paula Davis, R-Baton Rouge, in the House, and Sen. Jack Donahue, R-Mandeville, presented it to the Senate.

In his closing comments on the bill, Donahue drew applause from other senators when he said, “I’ll be damned if I’m going to cut $100 million out of education for the state of Louisiana when I know that’s what we need in this state to make it what it can be.”

“Nobody had a better solution,” he added.

Hewitt and fellow Republicans Ryan Gatti of Bossier City, Beth Mizell of Franklinton, Jonathan Perry of Kaplan, Neil Riser of Columbia were joined by Democrat John Milkovich of Shreveport in voting against the tax bill.

The Senate also worked Sunday evening on the supplementary spending bill, the last major piece of legislation from this special session, trying to decide what to do about amendments that House leaders opposed.

The amendments, approved Saturday by a Senate committee, added budget items that were not funded by the revenue bill back into the supplementary budget and would allow Edwards to decide how to spend any sales tax revenue generated over official estimates.

The importance of that provision might have been increased by a U.S. Supreme Court ruling last week that would allow states to require more retailers to collect state sales taxes on online purchases.

Democrats said it could be a year or two before the state starts to realize much money, while Republicans think the online tax payments will kick in sooner and generate more revenue.

Rep. Cameron Henry, R-Metairie who chairs the House Appropriations Committee, criticized the amendments for giving the governor too much latitude in appropriating surplus revenue, saying that would amount to a “slush fund” for “pet projects.”

Republican lawmakers have argued that the Joint Legislative Committee on the Budget, not Edwards, should have the final say on surplus appropriations.

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