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A second penny is a ‘bridge’ too far

Posted on March 5, 2016

By Jan Moller

Times of crisis call for shared sacrifice. But the deal being offered by big business interests to solve Louisiana’s historic budget shortfall would violate that basic principle by putting too much of the burden on working families that can least absorb a tax increase.

With Louisiana facing a $900 million budget gap that threatens critical health and education programs, a temporary one-penny increase to the state sales tax is a reasonable solution – as long as it’s part of a broader framework of revenue increases and prudent budget cuts. Even so, raising the state sales tax from 4 percent to 5 percent would make Louisiana’s combined (state & local) sales tax rate the highest in the country, according to the Tax Foundation.Who Pays? One penny

Louisiana’s high sales taxes are the major reason why families in the bottom 60 percent of income earners pay state and local taxes at twice the rate of the richest 1 percent as a proportion of total income. Raising the current tax by a penny will cost an average middle-income family in Louisiana $319 per year, according to an analysis for LBP by the Institute on Taxation and Economic Policy.

Published reports say that business interests are now pushing to add a second penny of sales tax. Let’s be clear: Picking this option means choosing to side with large, multinational companies over the working families of Louisiana.

Raising the money necessary to avoid devastating cuts in the current-year budget isn’t easy. But the second penny of sales tax wouldn’t be necessary if the business community – and the wealthiest taxpayers – were willing to share in the sacrifice. For example:

  • Temporarily suspending the payment of inventory and motion picture tax credits. Last year the Legislature put a $180 million cap on film credits, but the state currently is $46 million under the cap.
  • Removing the sales-tax exemption on business utilities would raise an estimated $60 million between April 1 and June 30 – and bring in $240 million to help address next year’s shortfall.

Beyond that, the Legislature could look to the beer, liquor and tobacco industries for additional revenues. Cigarette taxes have broad public support, yet the 22-cent per pack increase that passed the Legislature would still leave Louisiana 53 cents below the national average. Louisiana’s beer tax has not been raised since 1948 and is lower than in many Southern states.

Finally, legislators should remember that Louisiana is already a low-tax state for business. And that those businesses, just like families, are dependent on good roads, quality schools and safe communities that our tax dollars help support. But by proposing to add yet another penny to Louisiana’s sales tax, the business community has shown that it’s not willing to share in the sacrifice that’s needed to bring Louisiana out of this historic crisis.


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