Thursday, June 11, 2015

Thursday, June 11, 2015

Budget deal appears imminent; Increasing the EITC is the right thing to do; “No Tax Pledge” becoming a thorn in Republicans side and; Louisiana’s economy lags the nation

Budget deal appears imminent
With just hours left before the Legislature’s 6 p.m. scheduled adjournment, House and Senate negotiators appear to be close on a budget deal. Negotiators met late into the evening on Wednesday as they tried to resolve differences over the tobacco tax, film credits and a temporary suspension of the sales tax on business utilities. Greg Hilburn of The Monroe News Star reports that the at this point, any deal made on the budget will include either the Student Assessment for a Valuable Education (SAVE) bill or votes from enough Senators to support a veto session if needed.

 

Without SAVE, Jindal has committed to veto any of the taxes raised that aren’t offset by a credit, even though SAVE would require no money actually changing hands.Rep. Chris Broadwater, R-Hammond, distributed a specific list of cuts to higher education to colleagues in the House and Senate should Jindal ultimately veto the $350 million in revenue if SAVE isn’t passed. “I agree with everything the opponents of SAVE say about the bill except for one thing: I’m not willing to let a philosophical stand destroy my home university (Southeastern Louisiana) or the others,” Broadwater said. “So yes, I’ll fight like hell for SAVE if I get the chance.” Overall, Louisiana higher education institutions would be cut $282 million if Jindal vetoes $350 million in revenue not offset by credits.

 

The Advocate’s Tyler Bridges, meanwhile, reports that as of last night House members were pushing for a much lower cigarette tax than the $1.08 per pack approved by the Senate, and also want to cap Louisiana’s film subsidy program at $220 million per year – or $40 million a year higher than the cap approved by the Senate. To pay for it all, the deal would require businesses to temporarily pay a 3 percent sales tax on business utilities – up from the 1 percent temporary tax contemplated in a resolution by Rep. Jack Montucet.

 

Increasing the EITC is the right thing to do
The ongoing efforts by a coalition of business and nonprofits to raise the take-home pay for low-income workers got a boost from The Times-Picayune’s editorial board. Changes made to Senate Bill 93 would raise Louisiana’s match to the federal Earned Income Tax Credit from 3.5 percent to 7 percent. The Senate rejected the amendment and now the fate of the bill lies in the hands of a conference committee.

 

This should be an easy call for this Legislature. They give out tax credits all the time, albeit usually to big corporations and other wealthy types. Many lawmakers go on and on about the importance of initiative and hard work.This tax benefits people who are working very hard to give their children a more secure life. Even a couple of hundred dollars extra — which is what a qualifying family with two children could get under the expansion — can make a big difference.And doubling the credit wouldn’t cost the state a huge amount of money — an additional $235 million over five years. Lawmakers give way more than that away to corporations all the time. The earned income tax credit is a conservative approach to helping families.The federal credit was enacted during President Gerald Ford’s administration and expanded in the Tax Reform Act of 1986 championed by President Ronald Reagan. That’s good company for the all-Republican conference committee: Reps. Lance Harris, Joel Robideaux and Kirk Talbot and Sens. Adley, Conrad Appel and Jack Donahue. The credit helps not only families, but the businesses where they spend their earnings. These families pay taxes, including Louisiana’s sales tax — which is third-highest in the nation. Giving them a little extra financial cushion is the right thing to do. It is the compassionate thing to do. And it is the smart thing to do.

 

“No Tax Pledge” becoming a thorn in Republicans side
Louisiana’s governor isn’t the only one struggling to maintain a balanced budget while staying faithful to the infamous “no-tax” pledge that helped him win election. Several GOP-led states whose governors have signed Grover Norquist’s anti-revenue pledge are finding themselves in fiscal hot water. According to Bloomberg News, Nevada, Kansas and Alabama may raise sales, tobacco and corporate taxes and six other states have raised fuel taxes. In Louisiana, Gov. Bobby Jindal is remaining loyal to Norquist in the face of a $1.6 billion dollar shortfall:

 

The strain of trying to raise revenue without violating his pledge is most evident in Louisiana.

Jindal, a two-term Republican governor and expected presidential candidate, has threatened to veto tax increases unless legislators also pass a $350 million “offset.” The arrangement is byzantine: It would create a fee for college students — Norquist doesn’t consider fees taxes. Then, the state would give them an equivalent tax credit, which they would assign to the state’s university system, which would then in turn forgive the students’ fees. Because the never-paid fees aren’t taxes, the equivalent credit can then can be said to offset increases in taxes that actually would be paid, said Jan Moller, director of the Louisiana Budget Project, which advocates policies that benefit low- and middle-income people. The measure satisfies the pledge, Norquist said this week in response to a letter from Republican legislators who opposed the complicated plan and wanted approval to raise revenue without resorting to a “purely fictional, procedural, phantom, paper tax credit.”Kyle Plotkin, Jindal’s chief of staff, said the governor campaigned against tax increases and that without the college-fee plan or some other offsetting credit, he will veto them.

 

Louisiana’s economy lags the nation

One major reason why Louisiana has such trouble balancing its books – besides the massive tax cuts, drop in energy prices and proliferation of expensive tax exemptions – was reinforced by numbers released Wednesday by the federal government: The state’s economy simply isn’t growing that fast. Louisiana’s economy grew 1.9 percent in 2014 – trailing the national growth rate of 2.2 percent. That comes after a disappointing 2013, when the state’s economy actually contracted by 2.5 percent. As the Associated Press reports, much of this is due to volatility in the energy and manufacturing sectors.

 

Federal figures show the biggest contributor to growth in Louisiana last year came from makers of nondurable goods, including oil and chemical refiners, adding more than 2 percentage points to growth. That reflects a continued investment boom in refineries and chemical plants, fueled by low natural gas prices. “That’s where a lot of our expansion has been,” said Louisiana State University economist James Richardson, who serves on the state revenue estimating board. But those low prices also contributed to mining, including oil and natural gas extraction, being the biggest drag on the state’s economy. Natural gas output in Louisiana continues to fall as initial wells drilled in the Haynesville Shale become less productive and relatively few new wells are drilled. The Energy Information Administration estimates that natural gas production in Louisiana fell by 20 percent in 2014, to 3 trillion cubic feet, even as natural gas output nationwide rose. EIA figures show crude oil production in Louisiana fell almost 5 percent in 2014.

 

Number of the Day

$282 million: The possible cuts to higher education in Louisiana if a budget deal is not reached (Source: The Monroe News Star)