One more day to strike a deal

Negotiations between the House, Senate and governor’s office were continuing this morning as the minutes ticked away toward the 6 p.m. mandatory adjournment of the special session. Various reports had the two sides more than $100 million apart on fixing the current-year deficits, while others said the gap had been narrowed to $18 million. Legislative leaders and Gov. John Bel Edwards have been deadlocked over whether consumers should fill the gap through even higher sales taxes, or if businesses should share the burden by losing some tax breaks. During Tuesday’s discussions of Rep. Jay Morris’ HB 61, some senators indicated that it’s time for businesses to start pitching in. Tyler Bridges of The Advocate has more:

The key public action Tuesday took place when the Senate Revenue & Fiscal Affairs Committee approved a measure involving the state sales tax that would raise $100 million this year – or a good chunk of the way to covering the entire shortfall. In its unanimous vote, the committee — over the vociferous objections of business lobbyists — took HB61 that would eliminate nearly all 200 exemptions on one penny of the four-penny state sales tax and took away the exemptions on all four pennies. … The so-called clean pennies would leave in place the exemptions for groceries and prescription drugs that are protected under the state Constitution. “It’s very important to have every option available” in the final budget negotiations, state Sen. J.P. Morrell, D-New Orleans, the committee’s chairman, said afterward. The Senate will take up HB61 on Wednesday, and depending upon the final deal, could eliminate sales tax exemptions on two or three of the four cents.

HB 61 and HB 62 by Rep. Katrina Jackson, along with a package of bills sponsored by Rep. Julie Stokes that seeks to reform personal income tax by eliminating some deductions and flattening rates, are three major pieces of legislation still in play as lawmakers go into final discussions. Some good news did emerge Tuesday night, as Appropriations chairman Rep. Cameron Henry of Metairie announced that he’d found almost $40 million in state funds that could be used to fill the deficit without making any more drastic cuts. Senate President John Alario indicated that, as of Tuesday night, the remaining gap was $18 million – far more manageable than the $850 million gap lawmakers faced three weeks ago. In any case, the Legislature’s work to balance the budget will be down to the wire.

Expanding EITC would give working families a break

As business interests proposed raising the state sales tax above the one-penny increase already approved during the special session, opponents worried that it would hit low-income families harder than others, since they spend a higher share of their income on basic necessities. With that in mind, the Nola.com/The Times-Picayune editorial board says it’s time to expand the Earned Income Tax Credit for working families.

One of the main sticking points is whether to expand the earned income tax credit, which the governor and House Democrats want to do to ease the burden a higher sales tax will have on poor Louisianians. Some House Republicans are adamantly opposed because that move would actually cost the state money — which would mean lawmakers have to find more revenue. That’s a fair argument. But they are making it while clinging to tax credits for wealthier taxpayers and businesses, so they’ve undercut their own position. … More than 515,000 tax filers claimed the earned income tax credit on their 2012 Louisiana returns. That indicates how many low-wage workers the state has. For many families, the annual credit “is the biggest lump sum they get in a year. It’s a lot of money in the pocket (of people) who might be working really hard for $12,000, $15,000, $18,000 a year,” Louisiana Budget Project director Jan Moller said last year. … It is smart to keep the credit in the mix. It would give hundreds of thousands of Louisiana families a little extra money to spend, which would be good for all of us.

Who’s in charge here?

As business interests lobbied furiously to preserve their exemptions from state sales taxes, a Nola.com/The Times-Picayune columnist wonders if the Louisiana Association of Business and Industry has too much power at the state Capitol. J.R. Ball writes:

It was LABI — after beating back proposals to shed a few business tax exemptions — that countered with the idea of increasing sales taxes beyond the one-penny requested by Edwards. Blessing duly noted, House Republicans went to work “coming up” with the idea to further jack what already is on pace to become America’s highest sales tax rate. “You’re underestimating the influence LABI has exerted during this session,” said a lobbyist inclined to be aligned with the wishes of Edwards. “Nothing happens, especially in the House, without their blessing.” … Let’s take a look at the “solutions” being tossed around: increasing the most regressive of all taxes; making a TOPS college scholarship harder to earn and less generous; increasing sin taxes, especially on tobacco products; and cutting the individual income tax deduction (deducting excess federal income taxes from state income taxes) by 50 percent. … There’s a symbolic hit or two being absorbed by business, but make no mistake state Republican legislators want the poor and middle class to cleanup the financial mess they helped create by doing Jindal’s bidding in the past.

TOPS changes on the way

With legislators set to adjourn this afternoon, it’s easy to forget that they’ll be back on Monday for the start of the three-month regular session. With hundreds of bills prefiled, Louisianans can expect many changes, including potential to the popular TOPS college tuition assistance program. The program’s price of TOPS has ballooned since its inception, and  Julia O’Donoghue of Nola.com/The Times-Picayune has more on what changes lawmakers have in mind:

The House estimates it is $868 million short of what is needed to fully fund state government next year. Senate officials believe the hole is still more than $1 billion. Either way, any remaining shortfall is bad news for TOPS, which likely needs the budget to be whole to get fully funded. But lawmakers are already looking at ways to contain the costs of the TOPS program, even if receives all of its funding for next year. … Three bills have been filed to cap the amount of money given to TOPS recipients after the 2016-2017 school year. … There is one bill to up the cutoff ACT score for receiving TOPS from 20 to 21 for high school students graduating during the 2019-2020 academic year. In two other bills, legislators are also calling for the GPA cutoff for TOPS to be raised from a 2.5 to a 2.75. … Two bills have been filed to restrict the type of schools TOPS can be used to attend.

It pays to work

Critics often insist that federal safety net programs like SNAP and Child Tax Credits are deterrents to work that keep low-income Americans from pursuing better paying jobs. But a new report from the Center on Budget and Policy Priorities disproves that myth. Even when considering the benefits received through programs like SNAP and TANF, the authors write, the financial situation for working families is almost always more secure (thanks in part to Earned Income and Child Tax Credits) than those who do not work, proving that safety net programs incentivize work rather than deter it:

In the overwhelming majority of cases, in fact, adults in poverty are significantly better off if they get a job, work more hours, or receive a wage hike.  Various changes in the safety net over the past two decades have transformed it into more of what analysts call a “work-based safety net” and substantially increased incentives to work for people in poverty. … Workers in poverty typically have a greater incentive to work more hours or at higher wages than other workers do.  Workers with earnings below the poverty line face “marginal tax rates” — i.e., the reduction in benefits or increase in taxes for each additional dollar earned — that are typically well below those that other workers face.  

Number of the Day

$75 million – Additional revenue raised under Sen. J.P. Morrell’s amendment to HB 61 that strips many exemptions from all four pennies of Louisiana’s existing 4 percent sales tax (Source: The Advocate)