Sunday, July 21, 2024

Louisiana House committee approves legislation to gradually eliminate sales tax hike by 2025

by BIZ Magazine

By Victor Skinner | The Center Square contributor

Legislation to wean the state off of a temporary 0.45% sales tax ahead of its expiration in 2025 cleared the House Committee on Ways and Means this week.

Committee members unanimously approved House Bill 438, sponsored by Rep. Tony Bacala, R-Prairieville, to address the temporary 0.45% sales tax that’s set to expire in mid-2025, which is expected to cost the state about $420 million in revenue.

HB 438 initially proposed to cut the tax to 0.35% starting with the upcoming fiscal year that begins July 1, but Bacala amended the legislation to postpone the reduction until the following fiscal year. The bill would now cut the rate to 0.30% in July 2023, then to 0.15% in July 2024.

The temporary tax would then be eliminated completely on June, 30 2025.

“This a gradual reduction, equal amounts, over a two-year period, but really it’s three because the final is the natural expiration,” Bacala said.

Rep. Phillip DeVillier, R-Erath, questioned how the gradual drawdown would impact revenues.

“Next year … we would have $285 million of the $420 million to spend. In (fiscal year 2025), we would have … $152 million of $420 million to spend,” Bacala said.

Rep. Buddy Mincey, R-Denham Springs, questioned what the state would cut to compensate for the lost revenues.

Bacala said a more detailed look at the five year budget forecast is necessary to develop solutions, but stressed the bill is focused on providing a gradual adjustment rather than a fiscal cliff in 2025.

“We can have a gentle hill, or we can have a steep cliff,” he said. “That’s the choice we have here.”

“The other option is to vote to renew it, which I don’t think is appealing to anyone,” Bacala said.

Bacala noted that a tax incentive worth about $50 million sunsets at the same time as the 0.45% sales tax, so the net loss would be closer to $380 million in 2025.

“This isn’t a comfortable conversation, it’s going to be more uncomfortable the more we push it back,” he said. “As hard as it is to talk about this this year, it’s going to be tougher next year and tougher the following year.”

A similar bill, House Bill 1018, sponsored by committee Chair Rep. Rick Edmonds, R-Baton Rouge, would divert the revenue of the 0.45% sales tax to a “Temporary Sales Tax Fund.” The tax collections would then be deposited into four smaller funds dedicated to specific development projects, including a new Lake Charles bridge, a new Mississippi River bridge in Baton Rouge, expansion of the Interstate 49 corridor, and a Non-Federal Eligible Highway Program fund dedicated to road work.

HB 1018 also cleared the House Committee on Ways and Means on Tuesday, with a vote of 12-2.

“I think the wise thing to do is to start adjusting ourselves to the loss of that revenue,” Bacala said. “We can look at this bill. We can look at Rep. Edmonds’ bill. I’d like both of them to go to the floor so people will have choices.”

“I’d like to see two instruments go to the governor’s desk and the (legislative) body make the choice about which one is prime,” he said.

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