Thursday, August 20, 2015

Thursday, August 20, 2015

On the issues: John Bel Edwards; Budget woes likely to continue; Sales tax reform discussion begins and; Candidates lack specifics on tax reform

On the issues: John Bel Edwards

The United Way of Southeast Louisiana, working through its Women’s Leadership Council, has identified poverty as its top public policy issue for 2016. And it wants to know what the leading candidates for governor plan to do about an issue that affects one-third of Louisiana’s children and nearly as many adults. On Wednesday, State Rep. John Bel Edwards of Amite was the first candidate to sit down with the organization’s leaders to answer a series of questions. The Daily Dime was there, and this is some of what he said:

  • On expanding the state Earned Income Tax Credit (at 3.5 percent of the federal credit, the lowest in the country): “I do support it, I did support it and I will support it.”
  • Supports raising the minimum wage: “We have an awful lot of people who are working for the minimum wage who are trying to support families.”
  • On reining in predatory payday lenders by capping interest rates: Yes, because, “I have no confidence that the federal government (through the Consumer Financial Protection Bureau) is going to take enough action.”
  • He supports appropriate funding for Act 3, the 2012 overhaul of early childhood care and education, which requires $200 million by 2020 for full implementation.
  • He reiterated his support for expanding Louisiana’s Medicaid program to low-income adults, without seeking a waiver from the federal government.


The other three leading candidates – Public Service Commissioner Scott Angelle of Breaux Bridge, Lt. Gov. Jay Dardenne of Baton Rouge and U.S. Sen. David Vitter of Metairie – have been invited to answer the same questions in advance of the Oct. 24 primary.


Budget woes likely to continue
Legislators knew when they adjourned earlier this year that 2016 would bring more trouble for the state budget. And they were right. The Revenue Estimating Conference now projects a $713 million gap between revenues and expenses in the 2016-17 budget. The Advocate’s editorial board notes that the figure could get worse if suspensions of tax credits and exemptions don’t bring in as much revenue as expected. And there is also the low price of oil to worry about.


Gov. Bobby Jindal ordered a state hiring freeze, except for critical public safety and other jobs, as a way to cushion the current budget against falling revenues. The revenue increases from suspensions of tax breaks and exemptions are estimated, so it’s not at all impossible that the state will see a midyear budget cut, again, if those revenues don’t come in as planned. After that, though, the budget year that begins on July 1, 2016, is going to be a bear to balance. If anything, the years of Jindal robbing from trust funds and cutting state aid to universities means that balancing the next budget is getting harder, not easier. He’s taken all the “easy” money.“ Most of the tax measures we passed this year are sunsetting in three years, so they’re going away,” state Sen. Neil Riser, R-Columbia, told the Monroe News-Star about the new budget numbers. “Now we have to look at true permanent reform by examining all of the tax credits, rebates and exclusions that exist.” We agree with Riser, but legislators facing the voters in the October primary better come up with a better explanation for their performance than “we just did what the governor wanted.” That mentality led to a budget that is so seriously out of whack that the new administration is going to face significant challenges, likely even greater than those of this year.


Sales tax reform discussion begins

The Sales Tax Streamlining and Modernization Commission met for the first time on Tuesday, with discussion focused on broadening the sales tax base to include services while exempting businesses from paying sales tax on certain purchases. Louisiana currently has the third highest sales tax in the nation. That places a major burden on the poor, who pay more of their income in state and local taxes than the rich. Reform could help lower the rate. WRKF has the story:


Right now, the state taxes the sale of goods. And while those goods used to make up a large share of the market, they don’t anymore. Instead, people are buying more and more services. Scott Drenkard of the DC-based Tax Foundation says a modern system taxes those services.

Ideally, he says, “if you’re going to do tax reform, you’re bringing new transactions into the taxable arena. You can then bring the rate down overall.” Louisiana’s statewide sales tax is four percent. When combined with average local sales tax rates, it reaches nearly nine percent, the third highest in the nation. It’s not about taxing more transactions, but the right ones.

“Sales taxes are consumption taxes, you only want to apply them at that final point of consumption,” says Drenkard, and not to the purchases a business has to make in order to create a product. Commission member Dannie Garrett uses a farmer to illustrate the idea. “The farmer who owns the cattle buys a pencil and a piece of paper so he can keep track of how many cows he has and how much milk they produce,” he says. Under the model plan presented by Drenkard, sales tax would not apply to the pencil and pen, but only to the milk. The Commission will meet five more times before the end of the year, with the goal of welcoming the state’s next Governor with recommendations for a new and improved sales tax system.


Candidates lack specifics on tax reform
Earlier this week, Melinda Deslatte of the Associated Press pointed out that while all the major candidates for governor have said that tax reform will be a priority if they are elected, they have yet to release details on how they would go about it. All four candidates also say they would call for a special session to fix the budget, but again, no word on what exactly that “fix” is:


What tax breaks do candidates think are performing poorly and should be scaled back or eliminated? No particulars. What spending protections should be removed? No details. The Baton Rouge Area Chamber last week issued a report urging more specificity from candidates about the budgeting policies they’d pursue in a special session. “It’s not too soon, or unreasonable, for voters to call upon candidates to clearly state what, exactly, will be included,” says the report, which recommends ways to minimize the restrictions that give lawmakers less room to maneuver in budgeting. But when candidates get specific, they can alienate voters, campaign donors, lobbyists and constituencies. Providing detail could cost someone support. In a race where no one’s guaranteed a spot in the runoff, that’s a risk candidates so far seem reticent to take.


Number of the Day

$713 million – Estimate of the shortfall facing lawmakers next year (Source: The Advocate)