First of all, we’ll clue you in on the short version of this evening’s results: the Louisiana House Republican sales tax bill, HB 27 by Rep. Lance Harris, had its hearing in the Senate Revenue & Fiscal Affairs committee today, and what was a bill which called for a 1/3-cent temporary increase in the state sales tax with some minor removals of sales tax exemptions totaling about $369 million in tax increases shortly became a 1/3-cent sales tax bill with the wiping out of virtually every exemption to sales tax involving the business community for a tax increase on the order of $650 million or so.
And that wasn’t all. Another bill in that committee, HB 12 by Democrat Rep. Walt Leger, was gutted and filled with a copy-and-paste of Harris’ bill as amended, then sent to the Senate floor along with Harris’.
What this means is, in all likelihood, it will be Leger’s bill that will be the tax increase, with Harris’ bill more than likely being discarded on the Senate floor tomorrow. And that matters, because during testimony in the hearing Harris had warned the committee that as amended, his bill wouldn’t pass in the House and implied he would park the bill if it came off the Senate floor as it was amended in the committee.
So they took the legislation out of his hands and put it in Leger’s hands.
And Revenue & Fiscal Affairs chair J.P. Morrell, a leftist Democrat from New Orleans running the second most powerful committee in a 25-14 Republican majority Senate (Rev & Fisc has a 7-3 Democrat majority), represented that Leger had no knowledge of what he was doing. There were snickers in the committee room at such an absurd claim.
What happens now is the $650 million tax increase, which represents all of the money Gov. John Bel Edwards has demanded to fund his rather luxurious $29 billion state budget (at a time when Louisiana’s economy has shrunk for the past two years and is the worst performer in the South if not the nation), will go to the Senate floor – probably under Leger’s banner rather than Harris’. But it will need 26 votes out of 39 in a 25-14 Republican majority chamber.
Now, most of those nominal Republicans in the Louisiana Senate are pitiful representations of actual Republicans; several of them are actually turncoat Democrats and others are liberals who ran as Republicans in order to get elected in heavily conservative districts. There are 8-10 reasonably strong conservatives in the Senate who will vote against the tax increase regardless of its size, but that isn’t enough to kill the bill.
It might be enough to shrink it.
What’s likely is there will be a substantial amount of horse-trading on the Senate floor, amending it to put certain exemptions back into the bill in order to pick off Republican votes in favor along the way. All of the agricultural exemptions were pulled out in the committee today, for example – those will go back in in an attempt to get the votes of Senators from rural areas like John Smith, Gerald Long, Jim Fannin and others. Other potential votes might be traded for various other elements thrown in as Rev & Fisc “juiced up” the bill – it now essentially imposes a 4.3% sales tax on business utilities, manufacturing machinery and equipment, and installation of industrial equipment and other business activities, which means there are lots of crumbs to be doled out in order to give squishy Senators a deliverable to various constituencies which otherwise might revolt over such a lopsided attack on the state’s productive economy.
And then, at some point, enough horse-trading will have occurred to drag the bill over the line in the Senate to produce 26 votes, with 12 Republicans supporting a tax increase of indeterminate size. $450 million? $500 million? $550 million? The full $650 million? Who knows?
And what happens when it comes back to the House?
In all likelihood, the bill will hit the House floor either Friday or Monday, with the special session set to end at the end of the day Monday. That means the House would be in a box – concur with the Senate bill as amended and go home in defeat, or continue the fight into a third special session of the year. The third special session might be inevitable, of course, because after the taxes comes a budget.
And that’s where things get worse on the Republican side. HB 1, which is traditionally the state’s budget bill, is not the only budget bill set for debate on the House floor. Rep. Cameron Henry, the House Appropriations Chair, is attempting to use essentially the same budget bill John Bel Edwards vetoed at the end of the regular session this year, as a starting point for a new budget, and then write a supplemental budget bill to account for whatever revenue Harris’ – now Leger’s – sales tax increase would bring in.
But Leger has a competing budget bill, HB 26, which has made it to the House floor, and Leger’s budget bill “fully funds” everything Edwards wants.
At this point it isn’t known that Henry’s bill will pass and Leger’s will not. Because by passing Leger’s bill the legislature would then give the governor budget authority to spend all the money expected to come in, and if the tax increases pass the House is done. They could pass less than the full $650 million and then it’s up to the governor to trim what needs to be trimmed. That’s an easier vote than trying to impose fiscal discipline and “owning the cuts.”
And therefore it’s entirely possible that the majority-Republican and supposedly-conservative Louisiana House of Representatives might end up allowing left-wing New Orleans Democrat Walt Leger, whom it rejected as Edwards’ hand-picked man for Speaker in January of 2016, carry both Edwards’ full-boat tax hike bill AND the state budget two years later.
If this ends up happening, virtually nobody in the Louisiana state legislature with an “R” next to his or her name should be re-elected. That is Cleveland Browns-style failure and it can’t be allowed to stand.
Except there is a problem, which was quite apparent in today’s events. Namely, that part of the reason things are so horribly fouled up in a state legislature which is supposed to have a Republican majority is there is an intense lack of institutional knowledge on the conservative side. The Democrats and the governor laid in wait for Harris today and marched him square into a jackpot, interrogating and browbeating him nonstop for an hour in an effort to humiliate him, then gleefully dismantled his bill as he warned them their version wouldn’t pass the House, then stole the bill from him altogether by grafting it onto Leger’s bill.
And this happened only a couple of hours after Edwards vetoed three good-government bills by Reps. Tony Bacala, Rick Edmonds and Cameron Henry which promoted transparency in the executive branch so legislators would have a better ability to see how the state spends its money. All in all it was a day that looked a lot like the Germans slipping past the Maginot Line. And one could very credibly argue that this is the kind of thing that happens when your side is a bunch of rookies and the other side has a bunch of 30-year legislative pros who know the angles inside and out. So throwing the bums out just repeats the cycle again and again.
But behind the scenes there was even more to what happened today.
If you watched the Rev & Fisc proceedings, it was Morrell, the chair, and Louisiana Democrat chair Karen Carter Peterson who conducted the majority of the interrogation of Harris. The tone and tenor of their treatment of Harris couldn’t have been more dismissive and disrespectful – they acted as though he was some shoeless rube from the hills rather than essentially the House majority leader. Harris never lost his cool, but his membership, several of whom we talked to, are absolutely disgusted with that treatment and diametrically opposed to voting for any tax bill.
Meaning that all of these machinations could very well – perhaps probably – result in blowing up this legislative session when the tax increase gets to the House.
At this point, we bring you a movie clip…
That’s essentially what Morrell and Peterson were doing to Harris and the Republicans today. They blew up any spirit of compromise by berating him and stealing his bill, and in the process creating an environment by which the legislative session could very easily, if not probably, implode.
Why would they do that?
Understand a few things. First, John Bel Edwards and the Legislative Black Caucus do not get along very well. Edwards has taken the Black Caucus’ votes for granted from the start, and they’ve resented him for it. Edwards has negotiated with the House Republicans on the basis that the Black Caucus would “come around,” and they did in the House on Monday – 10 Black Caucus members switched from “no” to “yes” on Harris’ bill in order to get it across the marble to the Senate. But that wasn’t the end of the story, because where the House was under the impression, perhaps by way of wishful thinking, that Edwards would give them a deal at the $369 million price they were offering it’s two black Democrats controlling Rev & Fisc who have now taken the full $650 million.
Which is another way of telling Edwards that he should make sure they’re at the table if he wants to negotiate on the state’s budget.
Peterson, let’s remember, is the chair of the Louisiana Democrat Party. In that role she has been often at odds with Edwards, since he’s been attempting to assert control over the party as the state’s governor. He doesn’t control her. Furthermore, Peterson is well aware that the majority of both Democrat voters and Democrat officeholders in Louisiana are black, and yet Edwards doesn’t act all that outwardly beholden to those voters and officeholders. They’re getting, at most, crumbs from his table to date.
This has been an interesting dynamic in the Louisiana Democrat Party for several years. Namely, that since Louisiana turned red in the late 1990’s and after the turn of the century white Democrats had been telling black Democrats that “we’re the ones who can win statewide elections, so you need to let us run the party and we’ll make it worth your while with some of the patronage.” That argument was less and less effective because the white Democrats – essentially trial lawyers, who make up the majority of the politicians and money of that species in Louisiana – couldn’t win the races they said they could. Between 2008, when Mary Landrieu held off John Kennedy for re-election in the Senate, and 2015, when Edwards won his surprise gubernatorial election, not a single Democrat won a statewide race.
That didn’t bother black Democrats in Louisiana, because they saw the development as portending the day when they’d be in complete control of the party apparatus and the national and union money funding it. And if no black Democrat could win a statewide election in Louisiana that was fine; they’d run the state’s major cities and they’d be the ones sitting at the table negotiating deals with the Republicans to wet their beaks at the legislature.
Edwards getting elected interrupted this, and to make it worse he hasn’t come through on his promises to them. For example, they’re raising sales taxes in Louisiana which the Black Caucus is convinced are “regressive” and disproportionately paid by the poor. This presupposes that all the black community in Louisiana is poor, which is not the case, and it also presupposes that poor people pay lots of sales tax when they don’t – necessities like utilities and groceries are exempt. Curved-screen TV’s and Louis Vuitton bags aren’t, and one could argue if you’re poor you probably ought not spend your last dollar on such items, but nobody is more indulgent of bad habits of poor people than a Louisiana Democrat is.
So if the Black Caucus blows up the session – which, let’s remember, they did to the first special session this year – and Edwards is then forced to make the draconian budget cuts he’s warned about if his tax increase demands weren’t met and that makes him a dead duck for re-election next year, it’s not really the end of the world. At least at that point the Black Caucus is the counterparty at the table for the next Republican governor, and perhaps they might receive better terms than Edwards is currently offering.
Or, if the Republicans cave and the full tax increase or something close to it is met, then they’ve shown Edwards who’s boss by putting on that full-court press in Rev & Fisc.
Either way, there’s a loser here – which is the Louisiana taxpayer and the state’s economy. The state capitol is a Factory of Sadness where decent government is concerned, and honest people attempting to find a functional, competitive Louisiana have only frustration, tears and insult for their trouble.
As for Harris, that things would go so wrong today was foreseeable, if disappointing. Give him credit for trying to be an honest broker, but he’s up against people who simply can’t be negotiated with in good faith.
UPDATE: Here was LABI’s statement on what happened in Rev & Fisc today…
The Louisiana Association of Business and Industry (LABI) issued the following response to the Senate Revenue and Fiscal Affairs Committee’s decision to target Louisiana businesses with hundreds of millions in additional taxes:
“A clear and unfortunate signal has been sent to workers across Louisiana,” said LABI President and CEO Stephen Waguespack. “While GDP is shrinking and personal income is dropping, the Senate Revenue and Fiscal Affairs Committee proposed an unprecedented level of taxes, specifically targeted at those employers who make up the backbone of our fragile economy and provide opportunities for thousands of Louisianans.”
Waguespack added: “We are especially concerned with the crushing blow this proposal could have on manufacturing – an industry that employs more than 137,000 Louisiana workers with an average wage of more than $85,000 annually.”
“Employers and workers have always been more than willing to do their part to support statewide priorities like TOPS and hospitals, but they also need a partner in the Capitol to recognize their contributions to our economy and way of life,” said Waguespack. “We desperately urge the Capitol to focus more on good policy, substance and civility in these last few days of session and less on blame-game politics.”
HB 27 by Rep. Lance Harris (R-Alexandria), which seeks to extend .33% of the state sales tax, was amended tonight to impose a 4.3% sales tax on business utilities, manufacturing machinery and equipment, and installation of industrial equipment, among other business activities.
On May 22nd, LABI released an updated policy memo that clearly shows the state’s businesses are paying their “fair share” of taxes. LABI outlines all of the taxes that business is already paying in Louisiana, which is a larger share of taxes than the national average. CLICK HERE to learn more.
As the economy struggles to rebound from the oil and gas recession, where Louisiana’s GDP actually declined last year, the Legislature and the administration should focus on improving the business tax climate through tax reform, not simply raising revenue.