In 2016, Louisiana lawmakers pitched a temporary tax hike as a way to “buy time” to figure out how to solve the state’s money problems.
The one-penny increase to the sales tax was meant to help the state tread water while politicians got to work on how to right-size government to make it run leaner and more efficiently.
But now time’s up.
Problem is, politicians haven’t worked out a fix. Now the state faces – according to some – a $1.1 billion to $1.5 billion deficit in its budget, as the sales-tax hike is due to expire as promised.
Instead of cutting the size of government and preparing for the end of the tax hike, Governor John Bel Edwards expanded Medicaid to more than 450,000 able-bodied adults. Lawmakers failed to take advantage of opportunities to streamline government.
Now, they’re claiming there’s simply “nowhere to cut.” The governor and his allies sold the sales-tax hike as a temporary measure, but now they say they just can’t live without it – or other tax hikes.
Louisianans are smarter than that. We know government should operate no differently than families across our state who have to make ends meet each year. You and I can’t do it by just demanding a larger paycheck, and neither should government.
Over the last several months, we’ve heard proposals that run the gamut of possibilities. The most recent word from Governor Edwards indicated he’d prefer the legislature ditch the sales tax idea altogether and impose a regime of other taxes to make up $1 billion or more in revenue. Though we await firm details on exactly what he’s proposing, the solutions in the Governor’s outline would add water to a just-barely-kindling economic recovery in the state.
The problem with all of this is we haven’t really identified the problem. The truth is, given recent events, the actual difference between expected revenue and last year’s budget total is more in the range of $500-$600 million.
- In December, the Revenue Estimating Conference reported some good news: as the economy has shown a little sign of life, tax collections are exceeding initial estimates, and they increased the revenue for the coming fiscal year by $234 million.
- The impact of the recently-passed federal tax reform on Louisiana’s tax collections isn’t entirely clear yet, but most experts expect it to generate at least another $250 million in revenue in the coming year.
- You may have heard something about a “Continuation Budget,” as well. That budget automatically adds $440 million to last year’s total without regard for anything. That’s just crazy. That’s like a family who plans to make $50,000 next year setting their budget at $51,000, just because of “inflation.” We’ve got to make these numbers real.
So, while a $600 million deficit out of a $30 billion total budget is still a lot of money, it’s a very different story than the $1.5 billion deficit the Governor and his allies have been touting. We should act accordingly.
It’s completely unacceptable for the state to consider asking the taxpayers to contribute more money – once again – just because the state wants to spend more than it’s projected to collect. That’s especially true when the alternatives are taxes that would dampen economic recovery and export even more jobs to our neighboring states.
In reality, this is an opportunity to finally do the hard work of transforming the way government operates, because it’s just not working for taxpayers.
Instead of asking what taxes we should raise, we should come together and create a government that encourages job growth and brings economic opportunity to all citizens in every corner of the state. If the state’s economy grows, the tax base grows, and revenue problems take care of themselves.
So, let’s start now. Let’s start by taking a hard look at what the state spends money on and where we can tighten our belts. Let’s ask hard questions about what’s working and what’s not. Let’s take a look at how our spending compares to our neighboring states. And, let’s implement common-sense transparency measures to ensure taxpayers like you and me have full visibility on our government’s operations.
There’s are many things the legislature and the governor can and should do to unleash jobs and opportunity for Louisiana AND solve our looming budget crisis. Going back to the well for more tax money isn’t one of them.
Daniel J. Erspamer is Chief Executive Officer of the Pelican Institute for Public Policy, Louisiana’s free-market think tank.