Political Horizons: Officials are looking at tax swap legal issues

by mark ballard

Capitol news bureau

Significant parts of both Gov. Bobby Jindal’s signature initiatives from last year – overhauls of public schools and future state employee pensions — are hung up in court.

Given that experience, it comes as little surprise that much attention has been focused on the various legal standards that litter the landscape as Jindal pushes Louisiana toward eliminating income tax, another check-off on the bucket list for national conservative think tanks.

State Rep. John Bel Edwards, D-Amite, says he has been quizzing Jindal on how the proposed “tax swap” would work. “It’s fair to say that they don’t have answers for our questions; not that they don’t know what they’re going to do; but when we ask specific questions, we don’t get specific answers in return,” Edwards said.

The legislation has not been filed, but administration officials say they are looking at two bills. The first bill would repeal taxes on individual income, corporate income, corporate franchise taxes, while increasing taxes on the sale of most goods, including cigarettes, eliminating tax exemptions on many services, and modifying other tax credit programs.

If those two issues were in separate bills, legislators might take the easy route of repealing income taxes, but refuse to approve the tandem revenue measures designed to replace that lost money.

“You’d leave the governor in the awkward position of having to veto an income tax repeal,” said Jan Moller, director of the Louisiana Budget Project. “You just can’t do it if you’re going to tear a $3 billion hole in the state ‘fisc.’ ”

But, combining the two issues means Bill 1 would need a two-thirds vote, or 70 in the House and 26 in the Senate.

“It’s tough to get to 70 on anything in the Legislature. And it’ll be tougher this year, because you are, by definition, raising taxes on some people, while cutting them for others,” Moller said. “They are talking about so many tax increases and exemption eliminations that somebody is going to be mad enough to sue.”

The administration is being careful not to run afoul of the state’s “single object” law that prohibits filling up a bill with a bunch of different issues. It’s one of the points about Jindal’s package from last year that currently is being reviewed in court.

Jason Decuir is a lawyer for the state Department of Revenue who has been involved in the behind-closed-door negotiations. Decuir said he could not speak to the public without first obtaining the permission of his agency’s communications staff. He then did not call back.

But at a recent forum, Decuir said the administration is “very cognizant” of how to go about addressing different issues in a single bill to meet the “single object” test.

Then there are issues on the local level that could end up in court, at least as it’s currently being discussed, because expanding what services could be taxed or what taxes could be eliminated, runs up against what voters agreed to when they voted to impose taxes on themselves.

Edwards says that local voters may have approved a narrower list of taxes than what the administration seeks. “We can’t change that list from Baton Rouge after the fact,” Edwards said.

“There’s some taxes exempt at the local level that are not exempt at the state level. And those are huge dollar amounts,” said Tom Ed McHugh of the Louisiana Municipal Association. “How many poodle shops do you have to include in the new tax base to make up for that kind of impact?”

Decuir told the forum that the uniform tax code handles many of these issues and that members of local governments routinely come the Legislature to enact taxes or exemptions.

That’s just the first suggested bill. The second proposal deals with the administrative procedures and has its own set of worries among officials.

With all the moving parts capable of putting a kink into the whole endeavor, has Jindal given any indication that he would move towards a simpler tax system that doesn’t necessarily conform to the dreams of the conservative think tanks?

Edwards recalled telling the governor: “We might be in a position to help you do something but not everything. And he said, ‘Well John, I appreciate that, but truth is: I want it all.’ ”

Mark Ballard is editor of The Advocate Capitol news bureau. His email address is mballard@theadvocate.com.