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A millage for TOPS?

18th December 2017   ·   0 Comments

By Christopher Tidmore
Contributing Writer

With just 88 days remaining until the Regular Legislative Session, Gov. John Bel Edwards met with Senate President John Alario (R-Westwego) and House Speaker Taylor Barras, (R-New Iberia) on Thursday to figure out how to plug a more than $1 billion deficit—and whether a special session is needed to raise taxes.

The Governor has repeatedly reiterated his desire not to renew the expiring one penny in sales taxes enacted more than a year ago—calling it a “levy on the poor.” Speaker Barras, facing House conservatives who have proposed massive spending cuts when 1-cent sales tax increase expires June 30 (and some temporarily-halted sales tax exemptions return), has refused to consider an income tax increase.

House Republicans, bowing to a threat to the TOPS program, might concede to a temporary sales tax extension—insiders tell The Louisiana Weekly. However, led by Appropriations Chairman Cameron Henry, the GOP Caucus completely rejects Edwards’ notion of some form of income tax increase—likely limiting itemized deductions (restored post-Stelly) — in order to save the TOPS program, as well as avert devastating cuts in health care spending.

Leaders of both parties agree that some fiscal cuts are likely necessary, but La. Democrats reject the idea that the entire billion-dollar hole can filled in that fashion. The Governor justified the need for some form of tax hike noting to WWL radio last week, “It’s a huge amount of money.”

Edwards’ allies in the Legislative Black Caucus are just as anxious to end the regressive sales tax hike, creating an impasse with the State House GOP caucus’ refusal of any income tax increases. These Republicans were first elected in 2007 due to middle-class outrage over Stelly Plan income tax hikes. Effectively re-abolishing itemized deductions would have the pro-business constituencies calling for GOP members proverbial heads.

Still, these Republicans will do just about anything else to avoid defunding the Taylor Opportunity Program for Students (TOPS), Gov. Edwards’ go-to threat if the sales taxes expire without a replacement. Some GOP members are still explaining the single-semester massive cut to middle-class parents who endured thousands in unexpected tuition payments.

As La. state universities have effectively become self-funding entities, returning as much money to the state as they are appropriated, and most of the rest of the budget remain constitutionally protected, no additional revenue means a choice between TOPS and completely closing hospitals—neither a politically feasible choice to balance the 2018 budget.

However, last week’s U.S. Congressional Conference Committee report might offer a pathway to compromise. Under the joint GOP tax reform proposal, which will come before a vote in the U.S. House and Senate this coming week, the State and Local Tax Deduction (SALT) will be limited to $10,000. The compromise does allow both income and property taxes to be able to be deducted on a federal return, up to that threshold, improving the SALT deduction from the original GOP House and Senate versions of tax reform. That proves a boon to Louisianians who tend to pay far more in income taxes than property taxes.

Nevertheless, the typical homeowner’s property tax in the Pelican State averages $1,297 in Orleans Parish, $920 in Jefferson, $1,587 in St. Tammany, $1,062 in St. Charles, and less than $600 in most of the rest of the parishes in Louisiana. In other words, Louisiana’s effective property tax rate is the third-lowest in the country, while its progressive income tax rates – – two percent, four percent and six percent – are only slightly higher than the national average. In contrast, the La. sales tax rate (including local and state) ranks as third highest in the country, with the 10-cent tax in Orleans topping the national stats.

The average Louisiana family making $47,024 per year pays an estimated $1,202 in state income taxes. Put another way, the typical working middle-class family in New Orleans, who owns their own home, tends to pay less than $4,000 in state income and parish property taxes combined — well below the $10,000 threshold—while still paying the highest sales taxes in the nation.

Louisianians historically have been allergic to millage increases, and (the conventional wisdom suggests) would never contemplate them on a state level. Regardless, the 1974 State Constitution allows the legislature to enact up to 10 mills of property taxes outside the homestead exemption. That equates to roughly an average of $200 per homeowner statewide per year.

When business property tax is added, the sum total amounts to approximately the $1.3 billion that the 2016 sales tax increases rendered for the La. Treasury.

Imagine a scenario where State House Republicans stop a gubernatorial-backed income tax hike, and the Black Caucus and the handful of white progressives refuse to vote for a continuation of the one-cent temporary sales tax.

Neither side can get to a state constitutionally mandated two-thirds majority. Facing angry parents with college-aged kids about to lose their scholarships, a bipartisan group might consider the impossible, a 10 mills state property tax.

To make the idea more enticing to African-American legislators—whose constituents benefit less from TOPS than Caucasians—reform the college scholarship program.

TOPS Tech pays for two years of community college for Louisiana high school students who earn at least a 17 on their ACT. That score ranks as three points lower than the 20 needed to gain the scholarship for a four-year degree, but it gives marginal high school graduates a chance for advanced educational opportunities.

The Governor’s commission examining reforms of the TOPS program has proposed that anyone who receives an associates degree from a community college should get two more years of TOPS eligibility in order to go on to earn a bachelor’s degree at a state university.

Take this idea even further. Very few students at Louisiana’s HBCUs are eligible for TOPS scholarships, less than 10 percent of the student body by some estimates. Were the ACT qualifying score lowered to 17 to enjoy a scholarship at Louisiana’s Historically Black Colleges and Universities, most of the student body could begin their studies with a scholarship.

Such a move would make up for some of the devastating funding cuts that HBCUs have disproportionately endured in the fiscal environment of the last decade. Given the more progressive nature of property taxes versus sales taxes, such a scholarship reform might be enough to encourage Democratic legislators to “touch the Third Rail of Louisiana politics.”

This article originally published in the December 18, 2017 print edition of The Louisiana Weekly newspaper.

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