HITHER AND YON: The House Squashes Edwards’ Centerpiece Tax Bill

Last night at the state capitol, the last-gasp attempt by Gov. John Bel Edwards to boost taxes on individual Louisianans went down to defeat, as HB 38, the Rube Goldberg contraption which would have raised some $225 million over the next two years by eliminating the ability to apply excess federal itemized deductions to state tax returns, lost on a 47-55 vote.

Seven Republicans voted for the bill. They were Bryan Adams, Chris Broadwater, Bubba Chaney, Patrick Connick, J. Rogers Pope, Rob Shadoin and Julie Stokes. But two Democrats – Katrina Jackson and Major Thibaut – voted against it.

With HB 38 dead, Edwards is essentially out of options with respect to tax increases and he now has to scale back his plans to cut Louisiana’s budget increase – the budget he currently proposes is $26.3 billion, two billion dollars larger than the current year’s budget, and according to Edwards it’s still some $400 million out of balance.

The obvious solution is to grow the budget less, and in particular slow down the $2.4 billion increase in the size of the Department of Health and Hospitals budget that Edwards plans.

The governor’s defenders say that $900 million of that increase goes toward Medicaid expansion, and part of the rest comes from the state paying 13 months of Medicaid claims this year to make up for only paying 11 months of claims last year. The proper response to those statements might be that perhaps Edwards shouldn’t have chosen this year to expand Medicaid if it actually costs the state money rather than saving it as he and his allies claimed.

The failure of the great majority of Edwards’ tax hike proposals indicates that, at least in the House, he simply doesn’t have the votes to make policy as the redistributionist left-winger he showed himself to be in the legislature but ran away from last year. He’s going to have to practice fiscal discipline, though he doesn’t know how.

And the special session will end later this week with the legislature not doing much more than it’s already done. For Edwards, it’s a failure.

One of two things is likely to happen over the next year.

Edwards can choose to sit down with fiscal conservatives in the legislature and agree on a grand bargain of sorts to restructure Louisiana’s fiscal house, putting wide-scale tax reform on the table in an effort to grow the state’s economy and thus revenues with it while also coming up with a plan to reform state government and un-dedicate lots of dedicated funds which can’t easily be cut. If he does this, he will be recognizing that the old game of dedicating revenue into pet causes which are not top spending priorities, and then raising taxes to cover a shortfall in priority items, is no longer available; legislators and taxpayers refuse to fall for it anymore. That would represent a new political reality in Louisiana.

Or he can do what we expect, which is undergo a campaign of intentional, weaponized misgovernance. Namely, that Edwards will do everything he can to “make it hurt” by deliberately weakening the quality of service state government delivers to the people of Louisiana and then attempt to foist the blame for that decline on state legislators who voted against tax increases. Underfunding the TOPS program while doling out lucrative Department of Health and Hospitals contracts with connected players, for example, or the attempted re-routing of highway dollars to Democrat areas of the state. Or holding up LSU for ransom in advance of next year’s legislative fiscal session.

If it’s the latter, Edwards’ allies really should shut up about the “Washington-style politics” they’re currently whining Louisiana has fallen into, because the partisan bickering they decry is Edwards’ fault. Louisiana was able to fully fund TOPS and keep the state’s medical schools open on a $24 billion budget before Edwards came into office; that he refuses to do so is purely political; we’re willing to ascribe a large degree of incompetence to him, but not so much that he should skate for the decisions he’s made.

And the threats are meaningless. Does he really believe that a parent of a TOPS recipient who will now have to raid her retirement fund to pay for Junior’s final two years of school will blame an Alan Seabaugh or Cameron Henry for savage cuts to TOPS when John Bel Edwards is much better known and presented the Hobson’s choice between tax increases and TOPS being first on the chopping block?

Those Republicans who called Edwards’ bluff in the special session know the answer. They know it’s the governor’s nose which ultimately gets cut off, not theirs. And it’s that realization which killed HB 38 and the other tax bills.

Louisiana might not have reached the point of legislative independence as a matter of institutional reality. Another governor could well possess the skill necessary to have the House and Senate eating out of his or her hand. But this governor lacks that skill, and as such he will either learn to bargain in good faith across the aisle or he’s going to finish his one term in office as an abject failure.

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The new story of fiscal woe at the Capitol has Louisiana’s current budget in the tank because previously-passed tax hikes didn’t generate the revenues the experts thought…

Louisiana’s financial situation continues to deteriorate, with a top economist projecting the state will end the fiscal year on June 30 with a $200 million deficit because of lower-than-expected corporate tax collections.

The analysis by LSU economist Jim Richardson appears to mean the $600 million shortfall that Gov. John Bel Edwards has been asking lawmakers to close during the special legislative session is actually $800 million.

Edwards told reporters Friday that he hopes Richardson’s report encourages legislators to raise more revenue.

Facing opposition from anti-tax conservatives in the Louisiana House, the Legislature has approved only $222 million of the $600 million that Edwards has been seeking to prevent deep cuts to the safety net hospitals, LSU’s medical schools, K-12 schools, public colleges and universities, the TOPS scholarship program and the prison system.

If the Legislature raises no more than the $222 million, that money would have to fill the projected $200 million deficit from this fiscal year, with little left over, Edwards said.

Remember, the legislature has raised some $1.4 billion in taxes in the last 12 months. And they’re shocked on the 4th floor of the Capitol, where the governor’s office is, that the actual reality hasn’t conformed to those projections.

It’s another basic economic lesson the Edwards clan hasn’t learned but will have an opportunity to – when you raise taxes on taxpayers, they alter their behavior in order not to pay the full charge.

The $200 million difference comes from the fact the state expected to bring in some $350 million in corporate taxes and is only going to bring in $50 million instead.

The smart way to go about responding to that reality is to get rid of the corporate income tax altogether, since it’s a loser for the state’s economy and doesn’t bring in any revenue to speak of, and find $350 million in the $12 billion DHH budget, or the $6 billion Department of Education budget, that can be cut or shifted to local governments (and then perhaps give the locals some freedom to raise revenue as they see fit – one way to do that would be to allow local governments to set the homestead exemption at a level that works best for them).

Instead, expect to hear a fresh round of screaming by Edwards and his allies about fatcat corporations not paying their fair share, when those fatcats need only relocate to Texas or Florida and they’ll escape state income tax completely.

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The good news: food stamp participation is down across the country.

The bad news: it’s up sharply in Louisiana.

Why? because the oil business has gone down the tubes and taken lots of jobs with it, obviously, but not solely due to that.

Part of the increase has to do with unemployment, part with a better sign-up system. But it’s largely a combination of Louisiana’s poor economy and a large workforce that earns less, on average, than the rest of the nation.

“It’s a mix of more public awareness, maybe better administration, but the underlying reason is the state of the economy,” said Jan Moller, director of the Louisiana Budget Project, a Baton Rouge-based group that advocates government policies on behalf of low- and middle-income people.

Why on earth would it be a good thing to have “better administration” and “more public awareness” that the government dole is available?

And of course, this increased public awareness and “better administration” carries a cost to the taxpayer. Maybe it’s time to speak up for worse administration rather than better.

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Time for Today’s Last Thing, which focuses on something you’d rather not see – which is a smart burglar.

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