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Louisiana Governor Jeff Landry speaks in the Louisiana House of Representatives on the opening day of a legislative special session, Wednesday, November 6, 2024, at the Louisiana State Capitol in Baton Rouge, La. (Hilary Scheinuk / The Advocate, Pool) Facebook Twitter WhatsApp SMS Email Print Copy article link Save Can Gov. Jeff Landry hold the line against special interests? That’s the key question that emerged Monday as the governor tries to keep legislators, under heavy lobbying pressure from a wide array of interest groups, from giving away too much revenue in his tax package .
The special session has to end by next Monday. Landry is trying to raise enough money by simplifying the tax system to pay for his proposed income tax cuts. He says that cutting taxes overall, particularly for big corporations and the wealthy, will unleash an investment boom that will benefit everyone in Louisiana.
But film producers, developers of historic properties, oil and gas industries and local governments are among the interest groups fighting to keep their tax breaks. The Senate Revenue & Fiscal Affairs Committee is planning to reveal a plan Tuesday morning that would offset the revenue losses from the tax cuts, Senators were still working on the details, committee chair Sen. Franklin Foil, R-Baton Rouge, announced as Monday’s meeting was ending.
“Tomorrow should be interesting,” Foil said in an interview afterward. One idea under serious consideration would be to hike the state sales tax by half a cent, even though Louisiana already has the highest local and state sales tax rate combined in the country and a higher sales tax hits the poor the hardest. Raising the sales tax would spare some special interests from giving up their tax breaks.
Lobbyists filled the Senate Revenue & Fiscal Affairs Committee hearing room Monday. “After I wake up in the morning, I begin to get non-stop texts from different groups and organizations that either want clarifications or want to keep their tax breaks,” Foil said afterward. The man behind the tree Said Sen.
Jay Luneau, D-Alexandria, another committee member: “Everyone is trying to hide behind their own tree.” Luneau was referring to a whimsical statement by the late U.S.
Sen. Russell Long on the quandary that legislators face on tax matters: “Don’t tax you, don’t tax me, tax the man behind the tree.” Landry, emerging Monday afternoon from the office of Senate President Cameron Henry, referred to the old adage of how making laws is akin to making sausage.
“We’re making Cajun sausage,” Landry said with a laugh. “It’s not pretty going in. You hope it’s good coming out.
” Landry and Richard Nelson, the revenue secretary and architect of the tax plan, are following the advice of experts in trying to eliminate as many tax breaks as possible – known as broadening the tax base – in order to lower income tax rates. In some cases, a parish imposes the sales tax on a good while a neighboring parish doesn’t, and the state might or might not levy its own sales tax on it. Steven Sheffrin, a Tulane economist, said Landry is on the right track by trying to repeal many tax exemptions.
The current hodgepodge tax system “is fundamentally not a good policy,” Sheffrin said. “It creates a lot of uncertainty and confusion for business.” Low return on investment However, film producers and developers of historic property don’t want to lose tax credits that give them big write-offs.
The tax credits provide a low return on investment for taxpayers, according to independent studies. Oil and gas interests also don’t want to lose a provision in the tax code that allows five to seven companies to avoid a big reduction in corporate income taxes by storing goods in so-called Foreign Trade Zones. No other state offers this tax loophole, according to the Revenue Department.
Oil and gas interests also don’t want to lose the inventory tax credit – which gives them an income tax break from the state to cover a portion of the property taxes they pay on their business inventory. The tax credit cost the state $284 million last year. Local government officials fear Landry’s proposal to give them the option of repealing the business inventory tax could prompt them to opt out to remain competitive with neighboring parishes that don’t have the tax – but then see the move punch a hole in their budget.
Landry and Nelson have offered a one-time payment from the state to those parishes to try to make up the difference, but that wouldn’t be enough for the industrialized River Parishes, where the inventory tax accounts for 15% to 30% of their budgets. “We want to remain whole,” said Barney Arceneaux, executive director of the Louisiana Municipal Association. One way to get local governments to drop their opposition to Landry’s tax package could be to remove one part of it – where he wants to require local governments to stop imposing a sales tax on the sale of prescription drugs.
The state already exempts that purchase, so ending the local sales tax would simplify the tax code and benefit a key voting constituency: seniors. But local governments worry that losing money from not levying either the inventory tax or the tax on prescription drugs would cause budget shortfalls. State senators appear to be coalescing around a plan to keep the local sales tax on prescription drugs.
Senators are also moving in the opposite direction of House members who voted last week to reduce an expiring 0.45-cent sales tax with a 0.4-cent sales tax.
Senators are looking instead at increasing the 0.45-cent sales tax by 0.05-cents to half a cent.
Louisiana already has the nation’s highest combined sales tax rate , at 9.51%, according to The Tax Foundation, a Washington, D.C.
nonprofit. Under the plan discussed Monday, Louisiana would become the only state with a sales tax rate higher than 10%, at 10.01%.
Regressive tax system The higher sales tax would also increase the “regressivity” of Louisiana’s overall tax system, where households that earn $18,800 or less pay 13.1% of their income in taxes while families with incomes above $552,000 pay only 6.5%, according to the Institute on Taxation and Economic Policy, a Washington, D.
C.-based group that favors a progressive tax system. The higher sales tax rate would also likely cause heartburn for Democrats because the Landry plan already showers its biggest benefits on the wealthy since they pay more in taxes.
A household that earns $50,000 to $60,000 would get a $301 tax cut under Landry’s original proposal, while one that earns between $500,000 and $600,000 would receive a $5,181 tax reduction, according to an analysis by former legislative economist Greg Albrecht for three nonprofit groups. Landry is having to try to make up the lost revenue because his plan to raise $500 million per year by levying taxes on 41 different services r an aground in the House ..
