You are getting a tax cut July first.
The question – to be answered in the current special session – is how much?
It could be $400-million statewide, or as much as $1.4-billion, which is the total amount of “temporary” tax revenue that expires on June 30.
The other question that accompanies “how much?” is “what are you willing to give up – what and who are you willing to sacrifice – in exchange?”
Governor John Bel Edwards prefers the $400-million tax cut, because it doesn’t require sacrificing health care, TOPS, SNAP benefits, state parks, or any of the other ravages of state services required by the budget he vetoed last week.
“In my opinion, and the opinion of many members – both Republicans and Democrats – that budget proposal was not worthy of the people of Louisiana,” the governor stated. “Simply put, the cuts were too deep, too wide, too catastrophic. Because it’s your healthcare, your hospitals, your loved ones who are on waivers or in nursing homes; food on your table, your TOPS, your college education.”
Governor Edwards, who departed from tradition by delivering his start-of-session speech at U-L Lafayette, rather than the state Capitol, spoke about his plan of action for this special session. Branded as #OurLouisiana, it renews half of the fifth penny of state sales tax that is expiring, cleans exemptions from the remaining pennies of state sales tax, and eliminates the double-deduction for state income taxes paid. It keeps in place the “haircuts” given in 2015 to some business tax credits and exemptions, and makes strategic cuts to state spending. In all, it replaces $648-million of the expiring revenue.
“Who wouldn’t jump at the opportunity to fully fund our partner hospitals, our medical schools, TOPS and GoGrants, corrections and law enforcement, the National Guard, higher education, the Department of Agriculture and our state parks, and at the same time reduce the tax burden on the people of Louisiana by $400-million?” the governor asked the enthusiastic crowd in attendance at the university.
While the governor hasn’t officially incorporated it into his #OurLouisiana plan, organizations that advocate for taxation fairness, such as the Louisiana Budget Project, have proposed offsetting the disproportionate impact of sales taxes on the state’s lower income population by increasing the Earned Income Tax Credit. Speaker ProTemp Walt Leger (D-New Orleans) has authored the bill (HB 6) to double the current income tax credit.
On the corporate side, the Louisiana Association of Business and Industry isn’t giving a number for the tax savings they want to see. Instead, LABI’s president, Steve Waguespack, is merely advising “proceed carefully with our fragile, service-based economy.”
In his association’s weekly newsletter, Waguespack states “Louisiana’s reliance on business taxes as a share of total state and local tax revenue is already 13th in the nation, with employers paying roughly 48 percent of all taxes in Louisiana.” And, he adds, “Louisiana desperately needs more good-paying private sector jobs and how lawmakers structure this new round of taxes will go a long way towards deciding if that can happen.”
Let’s unpack the claim of “employers paying roughly 48-percent of all taxes in Louisiana.” While it is true that businesses remit (pay) sales taxes they have collected to state and local governments, the actual payer of sales taxes is you, the consumer. At the state level, for the current year, sales taxes make up 41% of the total State General Fund (SGF) revenue.
And businesses do pay a number of property-type taxes to their local governments, most notably inventory tax. Here’s the deal though – when a business files its annual income tax return, it can claim a refundable credit from the state for those local inventory taxes paid. They get that money back, from the state – from you.
In the end, corporate taxes paid – and kept – by the state are just 3.7-percent of total SGF. That’s $350-million of the $9.588-billion total state revenue for the current budget year, which ends June 30. For the next budget year, corporate taxes paid are expected to drop down to $300-million, 3.6% of the $8.3-billion estimated SGF.
As for what LABI is willing to give up? They’re not saying, simply stating noncommittally that they “will work in good faith to help policymakers throughout this process.”
Some groups and a few legislators want the maximum amount. Their position is absolute: no taxes, period. Any taxes, they say (as they always do), will destroy jobs.
Americans for Prosperity (AFP) is the most notorious of the anti-tax advocates attempting to influence the results of the special session. It was founded and is funded by the Koch brothers (Koch Industries, Georgia-Pacific, Invista, Guardian Industries, etc.).
The only division of the Koch conglomerate actively conducting business in Louisiana currently is Georgia-Pacific. They have three facilities here: a corrugated cardboard packaging plant in West Monroe (Ouachita Parish) that employs 138; a sawmill in DeQuincy (Beauregard Parish) employing 150; and a paper plant in Port Hudson (East Baton Rouge Parish), with 907 employees (down from 1110 ten years ago). That’s a current total of 1195 employees statewide.
We can’t determine via public records how much in total taxes Georgia-Pacific pays to the state and local governments, because business property valuations, machinery and equipment valuations, and inventory taxes are not permitted to be listed on local tax assessors’ websites. They are prohibited from public disclosure. You can find out what your neighbor’s home is worth, but not a business – because “privacy”.
What we can determine is how much the Georgia-Pacific facilities have NOT paid in local property taxes, due to the Industrial Tax Exemption program. That information is publicly available from the Louisiana Department of Economic Development website. Over the past decade, school boards, sheriffs, and parish government agencies have foregone $113,481,307 in taxes from Georgia Pacific ($638,404 in Ouachita, $2,274,548 in Beauregard, and $110,568,355 in East Baton Rouge). Put another way, that’s $94,963 per job.
AFP claims to be “an organization of grassroots leaders who engage citizens in the name of limited government and free markets.” Their national goals include “repeal Obamacare”. The Louisiana chapter of the organization currently employs two people in Louisiana. They do not have their own discrete website – merely a state page on the national website, though AFP Louisiana does have a Facebook page. They have two Twitter accounts: @AFPLouisiana, which basically retweets what is written by AFP state director @JohnKayJr.
Just as they did with last year’s gasoline tax proposal, and with this year’s push for the “Louisiana Checkbook” website (they bought the web domain, by the way), AFP is waging a campaign of misinformation, i.e., “fake news”. This time they’re trying to derail the efforts to fix the fiscal cliff.
They have help from the Pelican Institute, which has been branded as a “conservative think tank” since its 2008 founding by Kevin Kane. When Kane, who was respected, passed away in 2016, the organization hired Daniel Erspamer to take over as CEO. He was formerly employed by Americans for Prosperity, in a leadership role at their national office.
AFP-LA and LABI keep touting a recent Pelican Institute “study” as “proof” that any of the tax changes proposed by the Governor, the state Senate, and concurred in by the state House, will cost the state jobs. But, as this publication’s Lamar White exposed in his article last week, their base sales tax number – from which they made all their calculations – was wrong. They began with four cents of state sales tax, instead of the current five cents, thus predetermining the results from keeping all or part of the fifth penny would become a tax increase, instead of a tax cut.
AFP was supportive of the initial House-passed budget last session, because it would have decimated the state’s health care system, thus “proving” Obamacare Medicaid expansion was a failure. They had a Pelican Institute report on that topic, as well.
In Tuesday’s run-up to the start of the session, AFP’s John Kay has harped on Twitter about #BrokenPromise, which he explains is the governor’s failure to enact permanent tax tax reform, while the “temporary taxes” were in place.
Dude, that’s not how this works. The governor doesn’t enact laws, or taxes. That’s the job of the Legislature – in this case, the Republican majority legislature, which – as we all recall – didn’t pass any tax reform bills last year, or during this year’s first special session. In particular, the Louisiana House didn’t send any of those measures to the state Senate for debates or votes.
And wasn’t it the House Republican Delegation chairman, Rep. Lance Harris (R-Alexandria), who promised in 2013 that “We will continue to work on the issue so that we can craft a responsible way to achieve our objectives in reforming the tax code in the future”?
But then again, we all know exactly what this is about (besides corporate profits), because Rep. Barry Ivey (R-Baton Rouge) spoke out on the House floor during this year’s first special session.
“Last year, I brought a package of bills that attempted to do comprehensive tax reform. Yet the Republican leadership told me, ‘We don’t want the Democratic governor re-elected, and we don’t want to give him any kind of win with tax reforms’,” Ivey said on Feb. 28. “Still, I tried and failed. And at the end of that session, I was told, ‘We aren’t going to do tax reform. We’re going to come back for a special session and renew the fifth penny’.”
And here we are, with 13 days to fix what’s been years in the making.
As the governor said, “We have a chance, and we have a choice. This isn’t about me – it’s about all of us. This is our Louisiana, and our people and our state are worth fighting for.”
You are getting a tax cut. Will it be just yours, theirs, or ours?