Jim Beam column: GOP is cutting taxes again
Published 6:44 am Thursday, May 12, 2022
Members of the Republican-dominated Legislature are in the process of doing what their GOP colleagues did in 2008 that created eight years of state budget deficits. They are beginning to reduce taxes and revenues that might be needed.
The Stelly Plan of 2002 that eliminated state sales taxes on food, prescription drugs and utilities was possible because of an increase in the state income tax.
Unfortunately, the 2008 Legislature reduced the income tax and that created eight years of deficits because the sales tax revenues on those three items were gone.
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The Legislature last year began reducing revenues when a state senator amended a House bill that is taking 30 percent and then 60 percent of the revenues from vehicle sales tax collections.
Beginning in fiscal year 2023-24 that totals $148 million. It climbs to $296 million the next year and about $266 million each year thereafter. Those funds are being re-routed from the state general fund to the Construction Subfund of the Transportation Trust Fund.
Revenues are needed for roads, bridges, and other infrastructure, so the legislation is a good move. However, it does reduce the state general fund that pays for many other services.
When Democratic Gov. John Bel Edwards took office for the first time in 2016, the Legislature had to increase the 4-percent state sales tax to 5 percent to deal with a $2 billion deficit left by the Gov. Bobby Jindal administration.
The increase was approved 76-28 in the House and 29-10 in the Senate. The 1-percent increase was set to expire on June 30, 2018. When that time came, state budget deficits were still a problem, and legislators during a special 2018 session voted to keep 0.45 percent of the 1-percent sales tax increase.
The vote was 74-24 in the House and 33-6 in the Senate. The 0.45 percent is currently raising $420 million annually and goes off the books on June 30, 2025.
The sales tax increase has brought stability and better financial times to the state budget. Federal coronavirus pandemic funds have also helped. That is why it is unlikely the 0.45 percent state sales tax will be extended in 2025.
That’s OK, but some legislators, like their 2008 colleagues, can’t wait and want to start reducing taxes before then. Rep. Tony Bacala, R-Prairieville, is sponsoring House Bill 438.
HB 438 reduces the 0.45 percent state sales tax by 0.15 percent in fiscal year 2023-24 and in fiscal year 2024-25. The state general fund would lose $138.6 million in the first year and another $296.6 million in the second year. The tax goes off the books at the end of that second year.
The House passed HB 438 by a vote of 67-30 and sent Bacala’s bill to the Senate. The eight House Republicans who represent this corner of the state voted for the bill. Rep. Wilford Carter, D-Lake Charles, was recorded as absent.
During debate on Bacala’s bill, Rep. Beau Beaullieu, R-New Iberia, asked if a better solution might be a reduction in the state income tax. Beaullieu just happens to be sponsoring HB 917 that would reduce the top 4.25 percent individual income tax rate to 3.99 percent beginning with tax year 2023.
If that bill is passed, it would reduce the general fund by $19.6 million in fiscal year 2022-23, by $111.3 million the next year and by $90 million in succeeding years. Beaullieu’s bill is awaiting a hearing by the House Ways and Means Committee.
Rep. Blake Miguez, R-Erath, and chairman of the House Republican delegation, believes both of those tax cut bills should be considered. Actually, neither one of them nor any others should be considered. Rep. Sam Jenkins, D-Shreveport, and chairman of the House Democratic Caucus, made a good point during debate on Bacala’s bill. He said the 0.45 percent increase has given the state budget stability since 2018 that shouldn’t be destabilized.
Rep. Robby Carter, D-Amite, reminded his House colleagues of the 2021 legislation that diverts revenues from vehicle sales taxes to roads, bridges and other infrastructure needs.
The 0.45 percent sales tax isn’t a major burden on anyone. Jim Richardson, a respected LSU economist, told The Advocate the nearly 70 percent of Louisiana households that earn $50,000 or less are paying only about $65 per year because of that tax. Those earning $100,000 are paying about $130 per year.
Louisiana has many financial needs and cutting any taxes before they expire is risky. We don’t need a repeat of what happened in 2008 when those income taxes were reduced.