Competing proposals to restructure the state’s tax code will get their first legislative hearing Monday.
The Louisiana House Ways and Means Committee has a crowded agenda of bills to repeal or phase out state income taxes, increase the state cigarette tax, reduce tax rates and create a flat tax.
“Is there a consensus behind any one of them? I think the answer to that is no. At least not yet,” said state Sen. Dan “Blade” Morrish, R-Jennings.
With a short session, legislators must balance a state budget, promote their individual issues and decide whether to make dramatic changes to the state’s tax code. The big question is whether legislators can reach a consensus in the next eight weeks amid concerns about ripping more money from an already bleeding state budget.
Serving as a backdrop to the debate is bickering between the Republican and Democratic parties that is spilling onto social media networks. Republicans, pushing an income tax phaseout, claim there is an “awkward rift” among Democrats, with some supporting tax reform and House Democratic leader John Bel Edwards, of Amite, intent on killing proposals. Edwards said those claims are “make believe” and he is fine with cutting tax rates.
House Ways and Means Committee Chairman Joel Robideaux, R-Lafayette, said he will let members decide which tax bills advance to the House floor.
“My role in this is to (ensure) the bills (are) heard, give them a fair hearing,” he said.
The legislation includes:
- Three-year, five-year and 10-year phaseouts of state corporate taxes.
- Five-year, six-year and 10-year phaseouts of state personal income taxes.
- Reductions in state tax rates on corporate and personal income.
- A state flat tax of 1.9 percent on personal income of more than $12,500 a year.
Gov. Bobby Jindal unveiled a proposal in January to eliminate the state’s personal income and corporate taxes. He wanted to replace the $3 billion in state revenue that would be lost by nearly tripling the state’s cigarette tax, increasing the state sales tax rate and taxing currently untaxed services, including many transactions between businesses.
Religious leaders, public policy groups, the business industry and even the governor’s own consultant raised concerns about the plan.
Jindal opened the session last week by telling legislators his top priority remains to eliminate the state’s income tax.
On his way into the House chamber, Jindal stopped to shake hands with state Rep. Alan Seabaugh, and make mention of Seabaugh’s alternative proposal to phase out state income taxes.
“(The governor) said something about my 10-year phaseout. I thought he might be a little bit mad at me,” said Seabaugh, R-Shreveport.
Moments later, after extolling the elimination of income tax, the governor told legislators he was scrapping his own plan and expecting them to produce an alternative proposal.
Exactly which proposal now is “Plan B” is unclear.
Many of the bills call for an income tax phaseout without spelling out how the revenue would be replaced.
The Public Affairs Research Council, a Baton Rouge-based public policy organization, warned that a personal income tax repeal could result in cost burdens.
“There is loose talk of moving forward with profound long-term tax cuts and letting future leaders inherit the hard choices and problems that would flow from that decision. That approach lacks courage and real leadership,” PAR said.
The Council for A Better Louisiana, another public policy group, urged legislators to “end this unrealistic tax debate” before embarking on a decade of budget cuts.
State Rep. Hunter Greene, R-Baton Rouge, said the revenue can be replaced. Greene is trying for the third time in four years to phase out the state’s income taxes.
“A number of different proposals are out there. Some of them, I will support. The cigarette tax (increase) is certainly one. I’m not opposed to a small sales tax increase,” he said.
State Rep. Katrina Jackson is pushing the Legislative Black Caucus’ package, which includes eliminating state corporate franchise taxes, lowering the rates on state personal and corporate income taxes and increasing the state cigarette tax.
Jackson, D-Monroe, said the plan would leave the state with a $70 million state revenue increase that could go toward health care costs.
State senators also are circulating proposals.
State Sen. Mike Walsworth, R-West Monroe, wants to eliminate the state’s personal and corporate income taxes beginning next year.
He said the hard part will be filling what he characterizes as a $3 billion bucket, referring to the money that would be lost to state government. The state uses tax revenue to fund public services such as health care and education.
“Some of us are talking and seeing if we can come up with a compromise,” Walsworth said.
Morrish, who has a proposal to phase out state income taxes, also believes the problem will be replacing the revenue.
“I filed it because I thought there would be a train wreck. I just didn’t think that the governor’s plan, as he proposed it, was going to go anywhere, and I thought this would be an option,” he said.
State Rep. Harold Ritchie, D-Bogalusa, said the Black Caucus appears to have done its homework although he thinks Jackson’s cigarette tax increase is not high enough.
Ritchie said legislators are talking across the aisles about tax changes. Even the so-called fiscal hawks, a faction of House Republicans who normally focus on the budget, are jumping into the conversation, he said.
“You’ve got Republicans talking to Democrats, back and forth. You’ve got hawks talking to Black Caucus members. We all seem to be trying to get together on a plan. I hope we have something within the next few weeks we can all agree on,” he said.