Political Horizons for Sunday, 2/12
Constitutional limits are leading to creativity designed to grant tax breaks in a year that restricts them.
Legislators agreed to a number of tax breaks last year and flirted with eliminating the state income tax.
For the most part, the Louisiana Constitution is standing in the way of renewing those discussions this year.
The constitution prohibits “legislating with regard to tax exemptions, exclusions, deductions or credits” in an even-numbered year, such as 2012. The document is silent on the issue of tax rebates.
The state also is facing a financial crunch, prompting the governor to propose closing prisons, eliminating a day treatment program for juvenile offenders and cutting rates for doctors who treat the poor, among other reductions.
Neither the constitutional restrictions nor the budget constraints are stopping Gov. Bobby Jindal from proposing tax breaks for businesses.
State Rep. Joel Robideaux and state Sen. Neil Riser — the newly appointed chairmen of the House Committee on Ways and Means and Senate Revenue and Fiscal Affairs committees — respectively, are sponsoring the tax breaks for the governor despite earlier advising caution in embracing measures that reduce state revenue.
Any measure lowering or raising taxes goes before the two panels.
“With the state in the economic condition it is in right now, my approach is going to be we’ve got to be careful,” Riser, R-Columbia.
Shortly after advocating caution, Riser appeared at a news conference with the governor and embraced House proposals that could eventually reduce state revenue by more than $15 million a year. The potential cost to local governments is even steeper.
Robideaux, R-Lafayette, said he also will be careful in how he treats tax breaks that go before his committee.
“I’m not going to necessarily deprive people of having their bills heard, but there’s got to be some kind of financial offsetting,” he said.
The governor counters that his proposals will not reduce state revenue in the fiscal year that starts July 1, instead impacting future years when the outlook is expected to improve. However, state revenue is uncertain as evidenced by tax collections recently falling short of economists’ projections.
The governor also carefully crafted his proposals, which touch on education and economic development, to grant tax breaks despite the constitutional restrictions.
For example, Jindal wants to create a tax break for donations made to nonprofit organizations that offer scholarships to low-income students to attend private schools.
Just last year, legislation was proposed to create a tax credit for the exact same purpose. The bill failed.
With constitutional prohibitions in place, the proposal is finding new life with a tweaking of the language. Instead of being a tax credit, the proposal now is a tax rebate.
House Clerk Alfred “Butch” Speer said the law says tax credits are off the table this year, but tax rebates are allowed.
Jindal is seizing upon what is allowed.
For businesses, Jindal is proposing two rebates. He wants to enhance the Quality Jobs Program to offer an up to 15 percent payroll rebate. He also wants to create a moving expenses rebate for corporations that relocate their headquarters to Louisiana.
The Quality Jobs Program began as a tax credit that later evolved into a rebate.
For certain “targeted companies,” Jindal wants to engineer a calculation that allows them to base their corporate income and franchise taxes on the amount of in-state sales they generate instead of on a combination of sales, property and payroll. It is a complicated proposal known as single factor apportionment. The advantage for businesses is lower corporate taxes.
State Department of Economic Development Secretary Stephen Moret insists the approach is not a tax exclusion or an exemption but merely a new form of math.
He said Louisiana is trying to compete with incentive packages offered by Georgia, Mississippi, South Carolina and Texas.
“We’re just changing the apportionment approach ...” he said. “The attorneys have looked at this carefully.”
Michelle Millhollon covers the state budget for The Advocate’s Capitol news bureau. Her email address is mmillhollon@theadvocate.com.