Filed Under:  News, Politics, State

A second special session: Business or gas tax hike?

31st May 2016   ·   0 Comments

By Christopher Tidmore
Contributing Writer

A Special Session to raise taxes has never looked more likely, as of Thursday, May 25, 2016, when the Senate Finance Committee was advised by Gov. John Bel Edwards to reject a House plan to divert 3.3 percent of departmental fees to close a deficit in the TOPS program. Should the whole Senate follow the governor’s advice, and vote down the House budget, TOPS scholarships could be cut as much as 66 percent for the next school year – if new taxes are not approved.

Should the Senate Republicans leadership not find an alternate way to fully fund the Taylor Opportunity Program for Students in the next week, pressure from conservative legislators will be enough to allow Gov. Edwards to follow through with his promise to call a tax raising session of the legislature after Sine Die on June 6, 2016.

Backed into a corner post-June 6, Republicans options to close $600 million deficit could include revisiting “the Stelly Plan,” hiking corporate income taxes, a .10 boost in the Gas Tax, or potentially eliminating the “Hollywood South” film tax credit program.

And, its not just TOPS that’s in danger. Even the House’s minor diversion of $72 million from the scholarship program (compared to the Senate’s likely $172 million) did not seem to be enough to keep public-private partnership hospital services fully operating, a major concern of quite a few GOP swing votes who might consider new taxes in a Special Session.

On Sunday, May 15, 2016, a group of Louisiana Hospital Administrators told the Senate Finance Committee that they believe that the amended HB-1, which had transferred $72 million from TOPS to fund public-private partnership hospitals, still left the medical centers underfunded by about $150 million. State Department of Health and Hospitals Secretary Rebekah Gee further argued that the House version of the budget lead to the elimination of some waiver programs, most notably the Children’s Choice Waiver which gives options to families with children with developmental disabilities and the Adult Day Health Care Waiver which pays for in-home services—allowing patients to avoid relocation to nursing homes.

“We have to, in my view, have a second special session,” Gee told The Advocate. “The current budget makes me cut 50 percent of restaurant inspections, think about that. That keeps me up at night.”
Supporters of maintaining TOPS while simultaneously avoiding a tax increasing special session had banked their hopes the House plan to redirect 3.3 percent of dedicated fees paid to state departments for services rendered, a fund which could produce over $100 million for other priorities, including the scholarship program. However, critics call the one-year diversion of these fees illegal, violating the legislature’s own rules about utilizing “one time” monies solely for debt relief. The Senate Finance Committee seemed to agree.

Moreover, with even the House budget still underfunding TOPS by 24 percent, conservative calls to avoid a special session have begun to enjoy less and less success with a crucial minority of Republicans as well as most Democrats. The question is what kind of taxes can Gov. Edwards get passed through skeptical GOP Legislature?

Ostensibly, Republicans have already ruled out any income tax hike through the removal of deductions, yet that seems to be exactly the strategy which the Edwards Administration pursues. Just boosting taxes on business, not on individuals.

Both the current Governor and his legislative liaison, former Democratic State Senator Noble Ellington voted to repeal the so-called Stelly Plan, reintroducing itemized deductions on personal income taxes. Despite reports that both men have reconsidered their position on Stelly, Edwards himself confirmed that he expects business to take the brunt of his proposed tax increases this June. In a speech before the Baton Rouge Rotary Club on May 4th, the Governor said that he intended to increase revenues by reducing tax credits and rebates for corporations.

Louisiana Association of Business & Industry President Steve Waguespack immediately replied that he believes June “was too soon” for a special session, and let it be known that any further increases in business taxes, beyond those in the recent sales tax increase, were out of the question. Just to emphasize the point, representatives of the movie industry said if their tax credits underwent any further threat, the industry was done with the Pelican State.

With personal and corporate income taxes increasingly difficult to build a two-thirds coalition to hike, the taxable options of the Edwards Administration narrow.

Democrats are skeptical of any further increases in sales taxes, and the Governor himself ruled that out, noting, “We will not go up on sales tax again…We have the highest tax rate in the nation, and I feel terrible about that.”

Allies of the Governor have another potential option, a dime per gallon gas tax that would plug the deficit—and then later be used for infrastructure improvements, a priority of the administration. However, some of his own Democratic allies question whether a gas tax hike would constitute as regressive a levy on the state’s poor as a sales tax. Nevertheless, the Administration seems to be having more success convincing wavering legislators of the viability of a dime increase at the pump than any of its other proposals for the upcoming special session.

One of the great skeptics of utilizing sales-based taxes to plug the deficit has come onboard with the idea, as he explained in an interview with The Louisiana Weekly. Orleans State Senator Troy Carter admitted that the concept of passing a potential $.10 per gallon tax to close the deficit, and then only use it for infrastructure in the successive years (as the Administration has suggested), has some practical challenges.

“There are questions about if we can or can’t do it for whatever the reasons are from a legal standpoint. I haven’t heard that debate yet,” he said. Currently, all state gasoline taxes are dedicated to infrastructure from day one.

“But,” he added to The Louisiana Weekly, “I’ll tell you, for me personally, I can absolutely support it. I think it makes good sense. We are enjoying low gas prices right now—historically low gas prices. And, I think, as opposed to regressive taxes, like sales taxes, [in this, the] purchaser pays. I think that’s a measure that makes sense.”

“Obviously, we need all the resources we can for our infrastructure. Right now, I think taxing a portion of that to deal with our looming budget deficit, without going back and taxing the working poor through sales taxes—the most regressive form of taxes—makes sense.”

With Black Caucus members like Carter potentially behind a gas tax, Edwards has a chance to unify a Democratic delegation more splintered by the recent sales tax increases than the media often reports. The question remains whether Republicans who worry about voter wrath by defunding TOPS will also opt for a gas tax.

There is one other option for rural Republicans whose home communities do not benefit greatly from the movie industry. For the second year in a row, the film tax credits are under target by a coalition of rural GOP and liberal Democratic legislators. Arguing that the incentive program constitutes “corporate welfare,” some House and Senate members have targeted the elimination of the credits as a means to bolster revenue.

That has led the head of the “Keep Film in Louisiana” campaign, Ben Matheny to circumnavigate the state in recent weeks to ward off an attack on the credits post June 6. When asked by The Louisiana Weekly in just how much danger were the film tax credits, Matheny replied, “Cuts are going to be made, and the film tax credits are undoubtedly in jeopardy of being among them. Until we know if the film tax credits will be addressed at a special session, it’s difficult to say how immediate the danger is.”

“At last week’s state senate committee [May 23] hearing Senators Luneau and Riser made it clear that they were looking for programs to cut, but Senator Brown mentioned that he did not believe the committee was interested in ‘killing film’ in Louisiana. That’s a heartening sentiment when you consider that ending the film tax credit would certainly do just that. Regardless, now is a great time to start this conversation, and to let your representatives know that you support keeping film in Louisiana.”

Still, he added, “Senators Riser and Luneau were preoccupied with the program’s return on investment or ROI, but that’s a tragically narrow criterion for determining the efficacy of this program. At the core of an ‘incentive’ program is giving companies a tax break in order to ‘incentivize’ those companies to do business in your state. So it’s not completely surprising that they didn’t break even on tax revenue. With these productions doing business here, however, a tremendous degree of economic stimulus comes our way—both to the Louisiana workforce and to Louisiana businesses.”

This article originally published in the May 30, 2016 print edition of The Louisiana Weekly newspaper.

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