We figured that the weekend would pass rather quietly in the Louisiana legislature, with the Senate backing off much of the tax-increasing provisions its Revenue & Fiscal Affairs Committee added to the House’s compromise bill and crafting a budget that House members could reluctantly vote for in an earnest desire to go home today.
For the most part that happened, and then a time bomb was tossed into the package that could very well explode when the whole thing hits the House today.
Here’s the basic gist of what the Senate did…
The Senate passed its version of the state operating budget Sunday night. It would fully fund TOPS, higher education, and the Department of Health.
“I think it’s part of a good, solid policy,” Senate Finance Chairman Eric LaFleur, D-Ville Platte, said. “At the end of the day, we chose to raise the minimal amount of money that it would take to fund the important things in state government.”
The Senate version of the budget assumes House Republicans will agree to the Senate’s changes to the key tax bill that funds about 80 percent of the $648 million dollar budget shortfall.
The rest of the money would come from the BP oil spill settlement. The state would still have to make cuts.
Right now, that key tax bill would extend 4.5 percent of the state sales tax which is set to expire at the end of June. It would create a new expiration date of 2025.
Business and industry would pay at a lower rate, which is a significant change from the Senate tax committee’s version of the bill.
We’d mentioned last week that using BP settlement money in the general fund was a way to fill a budget hole. That’s been an item of contention between the House and the Senate; the Senate has wanted to reserve that money and use it to finance a bond issue for road projects, which in better budget times would be a good idea but the state just can’t afford it now without instituting budget austerity there is insufficient political will for, and the House has thus advocated for using it in the general fund.
But what the Senate did to HB 27, which is the sales tax bill by Rep. Lance Harris that originally was set to raise 1/3 of a cent in the state sales tax while removing some exemptions, was interesting if not surprising. After larding up that bill with about $300 million in tax increases by removing almost all the exemptions having to do with business activity in the Revenue & Fiscal Affairs Committee, the Senate simply jacked the 1/3 of a cent up to 1/2 cent and put the exemptions largely back where they were. What this means is about $540 million in tax increases toward a $648 million budget hole, between the new 1/2-cent sales tax bill and another bill by Rep. Katrina Jackson which changes the way Louisiana taxes Louisiana individuals and companies earning income outside of the state. Add the $53 million from the BP settlement, and the rest of the solution relies on budget cuts which magically appeared on Sunday from state agencies which previously couldn’t absorb anything without dire consequences.
But then the Senate threw a $21 million giveaway to the poor via an Earned Income Tax Credit increase. That was grafted onto Jackson’s bill, and it’s “paid for” by a new tax on the installation of tangible personal property to immovables limited to the first $10,000 of value that was added to Harris’ bill. In English, what that means is if you put a new roof on your house or you gut it and put in new sheetrock, or you put in new fixtures, etc., you’re going to pay up to $450 in sales taxes on the installation after you’ve paid sales taxes on the materials.
That’s a direct $30 million tax on flood recovery, and it’s a colossal insult to the thousands of Louisiana voters still not whole from the 2016 floods. And if and when New Orleans is hit or even affected by a hurricane, or maybe just a big rainstorm since that city’s Sewerage & Water Board is so criminally dysfunctional that it can’t drain a couple inches of rainwater, that will be a direct attack on new flood victims.
And it was J.P. Morrell, the chairman of the Senate’s Revenue & Fiscal Affairs Committee whose district is more or less the lowest and most flood-prone area in the city of New Orleans, who came up with the idea.
How that passed the Senate is completely beyond us.
We’d heard several times that the House’s plan was just to pass whatever the Senate sent back across on Harris and Jackson’s bills, sign off on the Senate’s budget, declare what victory they plausibly could and go home. We’d still bet that’s likely, even though to do so would greatly damage Harris’ credibility in warning that the House wouldn’t pass more taxes than his bill contemplated when it was sent to the Senate. But with the EITC and flood recovery taxes grafted onto the two tax bills on top of the new 1/2 cent, this session could still very easily implode with yet another special session lying in wait for the people of Louisiana.