Friday, June 12, 2015

Friday, June 12, 2015

It’s a wrap: “Embarrassing” SAVE bill paves way for budget deal; A compromise on cigarette taxes; Bob Mann on Jindal’s “disgraceful” fiscal legacy; and An early look at the winners and losers

 

It’s a wrap: “Embarrassing” SAVE bill paves way for budget deal

The 2015 Legislature finished its work Thursday after a frenzied flurry of deal-making that saw a half-dozen major tax bills win final approval in the final minutes before adjournment. Though the details of what was approved will be examined in the days ahead, the basic outline is this: After balking for weeks, the House finally approved the controversial “SAVE” bill that was seen as the only way to avoid Gov. Bobby Jindal’s veto of unrelated revenue bills that raise the money needed to keep colleges and health care services operating at current levels. The New York Times’ Campbell Robertson was on hand:

 

Here in the Legislature, even those who voted for the governor’s tax credit plan found the scheme to be questionable, but in the end they saw it as the only way to avoid something worse. “It’s an embarrassing bill to vote for,” said State Representative Blake Miguez, a Republican. “But with so much on the line and the governor being hardheaded, I had to take one for the people of my district.” Without an agreement, the pain of what had been a potential $1.6 billion shortfall would have fallen almost entirely on higher education and health care. The state’s public colleges and universities, already having borne some of the deepest state funding cuts in the country, had contemplated mass layoffs, closing departments and financial exigency.

 

While the SAVE legislation passed, an amendment was stripped off the same measure (Senate Bill 93) that would have doubled the state’s Earned Income Tax Credit to 7 percent – essentially providing a boost in take-home pay to more than 515,000 low-income working families. And as The Advocate’s Tyler Bridges notes, very few of the tax changes are likely to be long-lasting, which means the budget deal does virtually nothing to solve Louisiana’s long-term structural deficit.

 

The budget is full of one-year fixes that will lead to problems next year, as legislators cut spending, scaled back business tax subsidies and raised the state cigarette tax. In all, the Legislature raised about $720 million in new revenue for next year, but most of the tax measures will last for only one or three years, to satisfy demands from powerful business lobbies.

 

While the tax changes that affect business are only temporary, the ones that fall disproportionately on low-income residents – such as a $50 increase in vehicle title fees – are permanent.

 

A compromise on cigarette taxes

While many of the tax changes approved this week are temporary – with an expiration date of either one or three years – legislators signed off on a permanent 50-cent per pack hike in the tax on a pack of cigarettes. That’s much lower than the $1.18 per pack increase sought by public health advocates, but more than the $.32 cent increase that the cigarette lobby was initially prepared to accept. The Advocate notes that the tax would raise $108 million next year, which would be used as state match to draw down federal Medicaid dollars. But public health advocates were still disappointed.

 

Invest in a Healthy Louisiana coalition, which had pushed for increasing the tax above $1 per pack, voiced disappointment that legislators refused to increase the cigarette tax by more than a $1 a pack. The group argued that statistics show a dramatic decrease in the number of smokers and better healthcare in Louisiana. “Today the Legislature chose to stand with Big Tobacco against the interests of Louisiana’s children,” T. Bradley Keith, campaign director for the group, said in a prepared statement.

 

Bob Mann on Jindal’s “disgraceful” fiscal legacy

Gov. Bobby Jindal’s final regular legislative session is in the books, and two weeks from now he’ll likely be all but finished as Louisiana’s governor as he pursues his presidential ambitions. So it’s time to start assessing his legacy. Nola.com’s Bob Mann writes that on matters of fiscal policy, history will not be kind.

 

Because he surrendered so much revenue in the beginning, Jindal’s budgets have always included obscene amounts of one-time money. Despite bragging that he’s balanced every budget, Jindal ended most fiscal years with a “structural” deficit. In other words, he only “balanced” the books by draining various savings accounts and trust funds. Those funds were intended for specific purposes, which did not include serving as piggy banks for times when the state’s treasury ran short of cash. For example, he and legislators “balanced” the current fiscal year’s budget by robbing dedicated fund accounts and selling state assets to the tune of almost $1 billion. In 2008, Jindal correctly observed, “That is like using your credit card to pay your mortgage.” Whatever happened to that guy? Jindal also drove the state into virtual bankruptcy by showering businesses with hundreds of millions in reckless tax incentives and direct state appropriations. His prolificacy in subsidizing business – Jindal now calls it “corporate welfare” – is why legislators finally found it necessary to increase business taxes.

 

An early look at the winners and losers

Nola.com’s Julie O’Donoghue looks at the budget deal – and the other major bills that passed in the two-month session – and tries to tally the winners and losers. While state colleges and public schools are judged as winners for managing to escape any new cuts to their budgets, O’Donoghue thinks Gov. Bobby Jindal is a loser because two of his top priorities for the session (killing Common Core and promoting “religious freedom”) failed to pass. She also notes that people buying cars, cigarette smokers and film producers who rely on state subsidies did not fare well. The business “community,” meanwhile, had mixed results.

 

Most of the business tax credits that were being taken away or reduced are now scheduled to return three years from now. The business utility tax suspension will actually only last for one year, returning next July 1. While this isn’t ideal, it’s also not as bad for the business community as what had originally been proposed at the beginning of the budget process.

 

Number of the Day

 

515,789 – Number of Louisiana tax filers that claimed the Earned Income Tax Credit in 2012. A proposal to double the state credit died on the final day of the 2015 legislative session. (Source: Brookings Institution)