Legislature shifts vehicle tax revenue from general spending to Louisiana roads

By David Jacobs | The Center Square

The Louisiana Legislature voted Thursday to redirect most of the state sales taxes on vehicle sales from general spending to roads and bridges.

The change is expected to raise up to $300 million annually for transportation infrastructure, which would mean those dollars couldn’t be used for other priorities.

Legislators approved House Bill 514 during the final hour of this year’s regular session. Starting in 2023 and phasing in over two years, up to 60% of the vehicle taxes would go into a fund dedicated to transportation construction and maintenance. Twenty-five percent would go to preservation of existing infrastructure while the rest would be spent on major projects.

Legislators also added guardrails to the bill to protect state finances. If the state is facing a deficit of at least $100 million, the amount of money that could go into the transportation fund would be capped at $150 million. The amount of money that could be bonded out would be limited to that amount, which would give lawmakers flexibility.

HB 514 started as a proposal to tax medical marijuana. Sen. Rick Ward, a Port Allen Republican, proposed a successful amendment to make permanent a 0.45% state sales tax that is scheduled to expire in 2025 and redirect the money to a fund dedicated to construction and maintenance of transportation infrastructure.

But it quickly became apparent the sales tax extension would not garner the support of two-thirds of the members of the House, which is required to raise taxes. So senators tried a different tack, completely gutting the bill and essentially replacing it with the proposal to redirect most of the proceeds of the existing tax on automobile sales and leases.

Unlike the state’s gas tax, which has not been adjusted in three decades, auto sales taxes naturally will rise with inflation, Ward said. The downside is that the transportation money would come at the expense of the general fund, which could lead to budget problems and cuts to health care, higher education and other priorities.

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