In our article on Monday, I expressed some concerns about a few of the bills up for this special session on tax reform. After publishing that article, the governor called and encouraged me to avoid getting stuck on a bill or two. Instead, he said it would be a better public service if I explored the bills as a package. He also wanted me to mention to you that he called.
In short, he said, each bill is like a puzzle piece. Without all the pieces, the whole picture will not be clear. Instead, the best solution is to snap the entire puzzle together, back up a little, and see the complete picture. If we do that, he exhorted, we can enjoy the completed artwork as intended to be seen.
He then suggested I get with Department of Revenue Secretary Richard Nelson, who could help me review the complete package and quickly address anything bothering me. That last call occurred around noon on Tuesday. By three o’clock, I was on the 4 1/2 Floor of the State Capitol, talking with the governor’s staff in a special meeting called just for me.
It Was a Short Drive from Livingston Parish
I happened to already be in nearby Livingston Parish. A covert lunch meeting was called to strategize with local stakeholders on various parish policy issues. Regular readers will know of the years of diligent work and investment Citizens for a New Louisiana has made to get a majority of Christian Conservatives appointed to the public library boards across Louisiana, including Livingston Parish. Back in 2022, very early in that process, I was sued by Amanda “Banana” Jones, a public school bureaucrat who wanted to shut me up about the books we were finding in the Livingston library system.
Judge Erika Sledge of the 21st Judicial District Court ruled Jones’ effort a SLAPP (Strategic Lawsuit Against Public Participation) and ordered Jones to pay us $25,500 for our trouble. However, it didn’t end there. Jones continued her bullying with various appeals and requests for new trials. So far, we’re 4-0 against her relentless onslaught, with one to go. At any moment, the Louisiana Supreme Court could issue a final ruling on the procedural deficiencies in Jones’ suit. Despite Jones’ appeal being devolutive, she has yet to pay us the $25,500, which is steadily growing.
Thanks to our persistence, we have accomplished the goal on paper in Livingston Parish. Even though the board may have one hundred percent (100%) professing Christian Conservatives, deeds speak louder than words. Our actual majority appears to be a tenuous 5:3. However, the next elusive phase is finally ensuring the children’s section is clear of these vulgar adult books we keep finding. Suffice it to say, we’re incredibly close to having that “adult” shelf moved out of the children’s section.
The governor’s call came in the middle of that meeting. A quick calendar update, finish up the local issues meeting, and I’m off to the capitol.
4 1/2 Floor Capitol Meeting
I arrived at the Capitol around 3:00 p.m. and found Richard Nelson in the House chamber anteroom, where he had said he would be. He quickly connected me with James Lee, who escorted me to the 4 1/2 Floor to chat with John Kay, one of Governor Jeff Landry’s Policy Directors. I’ve known John and James for years, and it was good to see them both again.
In that meeting, John outlined the different components of the tax reform package. This was a high-level overview, so I may have to explore specifics in a future article. However, his explanations are worth sharing for our purposes here. I had always wondered which bills were part of the package and which weren’t. Also, why was there a “package” of bills and not a single “omnibus” bill? Of course, some of these bills are over one hundred (100) pages each, so having them separate makes them feel more manageable.
Try as I might, I can’t find a reference for you. However, the reason this package wasn’t done as an omnibus is due to something called the Dual Object Rule. Effectively, the legislature can’t bolt unrelated items onto bills (like we’ve been frustrated to see them do regularly in DC). So, these bills are done as “silos.” However, they’re all interrelated enough that separating them (passing some but not others) will not accomplish the complete picture drawn by Secretary Richard Nelson and Governor Jeff Landry.
“The Package”
The Governor’s “Package” includes bills numbered HB1 through HB14, as well as HB25, a severance tax bill. Nelson and Landry say these reforms will move Louisiana from 40th to fourth on the list of business-friendly states. Here’s the short-list with titles and their current status.
- HB1 by Rep Julie Emerson is the flat-rate income tax bill. It passed the House by a vote of 87:12 and is now pending a hearing in the Senate Revenue and Fiscal Affairs Committee. As of this writing, the bill’s fiscal note predicts a $1.3 billion tax cut.
- HB2, also by Rep Julie Emerson, is the flat-rate corporate income tax bill. It passed the House floor by 79:19, a slightly lower margin than HB1. The fiscal note on this bill is much more complicated. It jumps around randomly, but the five-year average is slightly more than a $100 million yearly tax cut.
- HB3, also by Rep Julie Emerson, repeals the corporation franchise tax. It passed the House 83:14 and awaits a Senate Revenue and Fiscal Affairs Committee hearing. As initially written, the fiscal note on this bill is about a $550 million annual tax cut. The amended bill’s fiscal note is a little less plain.
- HB4 by Rep Jack McFarland is a supplemental appropriation bill to cover state-wide election costs related to constitutional amendments. These amendments are likely what can be found in HB6 and HB14.
- HB5 by Rep Tony Bacala dedicates money to teacher pay raises that will be realized by savings from paying off unfunded accrued liabilities. It cleared the House Education Committee unanimously and is pending a hearing in the House Appropriations Committee.
- HB6, by Rep Beau Beaullieu, calls for a special election in March for a constitutional amendment. It was reported favorably in the House and Governmental Affairs Committee earlier today. It has yet to be scheduled for a floor vote.
- HB7 by Rep Julie Emerson is my favorite bill from last time. It moves those pesky dedicated funds out of the Constitution and into statute. It also includes stricter limits on government spending. Geymann’s spending limit (from HB13 and HB14, which will be mentioned later) has also been amended onto this bill. Effectively, this bill represents much of what the Governor wanted to accomplish in the Constitutional Convention that Senator Cleo Fields ultimately blocked.
- HB8 by Rep Ken Brass was not one of my favorites, as mentioned in the last article. However, John Kay said this necessarily clarifies the law because many digital services already collect sales tax while others do not. Some of these digital services are holding the money in escrow and have yet to send it to the state because Louisiana does not officially have it in the law. So, we’re being charged the tax, but the state isn’t getting the money. The fiscal note on this bill shows a $40 million tax increase, allowing locals to levy the same tax (potentially doubling the total). How much of that you’re already paying is uncertain. This bill passed the House 80:19 and is pending Senate introduction.
- HB9 by Rep Neil Riser provides for sales and use tax on certain services. It cleared the Ways & Means Committee 16:2 and the Appropriations Committee 17:6. It’s scheduled for a floor debate on November 14th. The fiscal note reflects at least a $500 million annual tax increase.
- HB10 by Rep Mark Wright increases the number of transactions, services, and goods subject to sales tax. It cleared the Ways and Means Committee on November 13th by a vote of 16-2. The fiscal note reflects this is an $882 million tax increase. However, the amount local taxing authorities may realize from this expansion isn’t included in the note. It’s scheduled for a House floor debate on November 14th
- HB11 by Rep Daryl Deshotel is a bill that rewrites much of the property tax section of the Constitution. It’s complex but appears to extend a one-time financial bridge for parishes that stop charging the inventory tax. It also leaves homestead exemption in the Constitution. This was a top concern for lower-income households afraid of losing their homestead exemption. As written, that concern should be laid to rest. It made it out of the House 79:17 and is awaiting a hearing in the Senate Revenue and Fiscal Affairs Committee.
- HB12, also by Rep Daryl Deshotel, is complex. As I understand it, it involves untangling, simplifying, clarifying, and reshuffling various special, dedicated trust funds accumulated over the decades. Some of these include the Revenue Stabilization Fund and Budget Stabilization Fund. It was explained to me like this: “It’s like going broke while staring at a full savings account that you aren’t allowed to touch.” It passed the House 76:17 and is currently being received in the Senate.
- HB13 by Rep Brett Geymann Limits the amount of money that may be appropriated (spent) in a fiscal year. Growth is based on calculations of Louisiana’s population and inflation (as reflected by consumer and medical price indexes over five years). It passed the House 81:14.
- HB14, also by Rep Brett Geymann, appears to be a constitutional amendment companion to his HB13. The bill carries the same description: It limits the amount of money that may be appropriated in a fiscal year. It cleared the House Appropriations Committee unanimously (19:0) and is awaiting a House Civil Law and Procedure hearing.
- HB25 by Rep Neil Riser appears to be another swing at reducing the severance tax. Rep Beau Beaullieu had a bill (HB259) with a similar purpose in the regular session that could not get across the finish line. The bill’s fiscal note says the impact on state revenue is “indeterminable” but predicts it will be a cut in taxation. The expected range is between -$250 million (a tax cut) and +$150 million (an increase). Of course, the severance tax will be based on how much oil and gas business we do in Louisiana. Historically, a reduction in the rate of taxation ends up bringing in more tax revenue because the reduction spurs economic growth.
Wrap Up
When all the factors are observed together, the complete puzzle is a $600 million net reduction to the state treasury. That’s accomplished with several bills creating $2 billion in lower taxes. Those reductions are offset with another set of bills, which adds back $1.4 billion. There are still questions about how much this will impact local government, as the final notes have been mostly silent on that component.
The next question becomes, what will the Senate do with these measures? We all witnessed Democrat Cleo Fields block several of the Governor’s top priorities during the regular session. Fields will likely remain the Senate and Governmental Affairs chairman until January 3rd, 2025 when he’ll be sworn in to Congress.