We’ll see what develops this week, and things can always go wrong, but after the way everything worked out on Friday we’re actually pretty optimistic that the special session on tax reform might turn out to be a fantastic win for Louisiana’s people.

And we had some doubts that it would.

Via WBRZ-TV in Baton Rouge, here’s where things stand as of Friday evening…

Gov. Jeff Landry’s ambitious tax plan, which had previously encountered minimal resistance, hit its first bump on Thursday as lawmakers balked at applying sales taxes to more goods and services that are tax-free now.

Lawmakers said Landry was unable to secure the 70 votes from the House of Representatives needed to pass a sales tax expansion that would tax more than 40 currently untaxed services, so the House delayed voting on it.

The bill, House Bill 9, would generate $500 million to partially offset the estimated $1.3 billion shortfall from cutting individual income taxes to a flat 3% tax.

The proposed sales taxes would apply to services ranging from streaming platforms like Netflix and online dating services like Tinder to car washes and pet grooming.

Rather than call the bill to a vote, the House adjourned until Monday leaving time for back-room discussions for the governor and his allies to try to round up more support.

Meanwhile, other significant bills moved forward Thursday, two in the House and the other in the Senate.

The House narrowly passed another part of Landry’s tax plan and voted 99-0 to advance a $2,000 pay raise for certified teachers and a $1,000 increase for school support staff.

House Bill 9 is the one which “broadens the base” of Louisiana’s sales taxes by adding lots of things which aren’t currently taxed to the tax rolls. And it’s not so much that the sales tax itself is a burden to the state’s economy – it is, but the state income tax is a lot bigger burden and that’s getting flattened and reduced and potentially even phased out, so it’s a net win – but that what we’re talking about is a lot of services which are performed by small businesses.

Not Netflix, obviously. But for things like dog grooming, you have a whole bunch of Mom and Pop operators who aren’t set up to collect sales taxes and would then be hit with compliance costs they can’t necessarily pass on to the customer – and even if they could, it would take time to recoup those costs when they aren’t sitting on a bunch of capital to fork them over in the first place.

So the Mom and Pops are screaming, and a lot of the conservatives in the House really, really don’t want to vote to impose new taxes when they ran on just the opposite.

The response to that, obviously, is that if those “pay-fors” don’t pass, Louisiana will get stuck with a budget deficit.

And the response to that is “Don’t threaten me with a good time.”

A budget deficit – a sizable one – needs to be a goal of this special session. Because if you can pass tax cuts but not the “pay-fors,” then your only option is cutting the budget.

By the way, we’ll give Revenue Secretary Richard Nelson his due, because the Legislature passing the teacher pay raise framework was a massive win for the state.

Not that giving teacher pay raises is a big conservative win; it isn’t. Using state dollars to give raises to one of the most influential Democrat-leaning special interest groups is what we’d call a suspect endeavor.

Besides, public school teachers don’t work for the state. They work for local school districts, and that’s who should be paying them.

Ahhh, but Nelson’s plan was to have the state clear off a big chunk of pension debt those school districts had accrued, and then force them to direct the savings from the debt service into the teacher pay raises. Passing that was a no-brainer, and now the Landry administration can’t be called names for “canceling” the teacher pay raises while at the same time saving money for future budgets and striking a blow for local responsibility.

That still has to pass the Senate, but it’s expected to.

We’re not sure that the other “pay-for,” which is the re-upping of John Bel Edwards’ 0.45-cent state sales tax hike, will, though…

Republicans in the House caucused in private during the day to try to find a way forward on the tax measures.

After the caucus, the House narrowly passed the one measure, House Bill 10. It would reduce a 0.45% portion of the state sales tax to 0.4%, repeal 84 current tax exemptions, and add new ones, such as exemptions for prescription drugs, baby
and adult diapers and Bibles.

Tax bills require a two-thirds vote to pass. The House passed HB 10 71-23 after a lengthy debate over amendments and other details.

The philosophical objection to renewing the .45 was that doing so is a new tax – defined by the observation that if the Legislature were to do nothing, that tax would expire, so renewing it is tantamount to a tax increase. You could make the argument that this is a matter of semantics, and neither position is illegitimate. By reducing the renewal to 0.40, there’s a little sugar-coating – if it’s a tax increase, at least it’s a smaller one, and it’s offset by what’s happening to income taxes.

Can Team Landry get 26 votes in the Senate for it? We’ll find out.

We’d said all along that passing the tax cuts alone would make Landry a hero, and then getting spending cuts to solve the budget problem would make him a legend.

And if this plays out like it’s looking like it might, Landry is going to go into next year’s regular session with the option to act exactly like Edwards did when he went into office, but with a completely different aim. From an earlier post on this topic…

But as soon as he got elected Edwards then began screeching about the “fiscal cliff” and the impending implosion of state government if he couldn’t get massive tax increases passed. He even threatened the end of college football in Louisiana, as stupid as that was.

And it worked. He got a full cent of sales tax passed, plus a host of onerous business taxes. And over his eight years he basically doubled the state budget, for a state with a population which was stagnant or shrinking, and which had net outmigration in each year he was in office.

Edwards will go down as a massive failure as Louisiana’s governor. You’d have to go back to Edwin Edwards’ last term in office to see anything that would match the stagnation this state suffered during Edwards’ tenure. But from the standpoint of getting his way and sticking it to his political enemies, there is something to be learned by his example.

What does that look like?

Here’s an idea – go to that legislative session next month and pass all the tax cuts everybody likes. Flatten the income taxes, kill the business taxes we all know run economic activity off to Texas and Florida and elsewhere.

Create a deficit. Deepen the “fiscal cliff.”

And then go into next year’s regular legislative session screeching about the utter disaster facing Louisiana’s government because there’s no money coming in.

That’s leverage. Just like Edwards had.

The difference is in what you use the leverage for. In this case, Landry can use it to scrub the state’s $50 billion budget.

That was written about five weeks ago and as things stand, it seems like this is right where we could be at the end of the special session.

And that’s what we were hoping for.

We’re not saying Team Landry has recognized the potential win they’re looking at. Not quite yet. But we’re getting there.

You’ll know we’ve arrived when the state’s legacy media begins screeching about how there won’t be enough money for crippled poor kids or that the underprivileged will starve in the streets due to Landry’s tax cuts. That’s exactly what we hope will be the state of play heading into next year’s regular session.