The CAT is gone

The CAT is gone

The centerpiece of Gov. John Bel Edwards’ tax package - a proposed commercial activity tax on corporations contained in House BIll 628 - failed to make it out of the House Ways and Means Committee on Tuesday.

Number of the Day

$18 million - Amount of cuts to higher education under a standstill budget proposed by Republican House members. (Source: The Advocate)

The centerpiece of Gov. John Bel Edwards’ tax package – a proposed commercial activity tax on corporations contained in House BIll 628  – failed to make it out of the House Ways and Means Committee on Tuesday. The author of the bill, Rep. Sam Jones, voluntarily deferred the bill which was projected to bring approximately $288 million a year, about one-third of its original projection. The Advocate’s Tyler Bridges has the story:

Jones wanted to avoid embarrassing himself and the governor with a lopsided defeat and wanted to keep Democratic members of the committee from having to vote for a tax that had no chance. Jones’ conceded afterward that his move effectively means the commercial activity tax is dead for the legislative session. Edwards had originally proposed the measure as the linchpin of his overall plan to prevent the “fiscal cliff,” when $1.3 billion in temporary taxes will expire in mid-2018.

Addressing the media shortly after the vote, Edwards said it’s now up to the House to come up with a plan for solving next year’s $440 million budget shortfall and the looming fiscal cliff. The AP’s Melinda Deslatte was there:

The Democratic governor says time remains in the two-month legislative session to pull together a package of tax changes that could help close a $1.3 billion budget hole looming in mid-2018. But he says he’s looking for House leaders to “step up, offer solutions and not just continue to say no.” He says lawmakers need to stop wasting time and work on rallying support for a tax approach.

It’s worth noting that the budget crisis is man-made, and the solutions are there if elected officials can muster the political will to approve them. The rejection of the CAT does not absolve legislators from coming up with a tax package that replaces the $1.3 billion in revenues that expire in 2018. Outside groups that have studied the tax structure all agree that this should start with eliminating costly income tax deductions, including the ability to deduct federal income taxes on state returns. That should be coupled with a reduction in the state sales tax.  Instead of kicking the can down the road or pretending the problem doesn’t exist, the Legislature should work towards a fairer, more adequate and more sustainable tax structure.

LBP’s recommendations for tax reform can be found at investlouisiana.org.

 

House Appropriations wants more cuts

Even after a decade of budget cuts to higher education and social services, members of the House Appropriations Committee are looking to cut more. The committee heard testimony from agency heads on how a “stand-still” budget would affect them. House Republicans are expected to propose a budget that would allocate 95 percent to 97.5 percent of projected revenue. The Advocate’s Elizabeth Crisp reports on what higher education leaders had to say.

House Republican Caucus Chair Lance Harris, of Alexandria, asked Higher Education Commissioner Joe Rallo what would happen if higher education is funded at the same level as it was after a special session earlier this year. In a recurring theme among agencies, Rallo said that increased costs mean the same amount of money doesn’t go as far. “People talk about a stand-still budget but the budget we’ve been presented is basically $18 million less for higher education, 30 percent less for TOPS, increased costs in retirement and medical, so it’s really not a stand-still budget,” Rallo said. “It would represent a loss.”

 

Death penalty repeal bill advances

Louisiana is one step closer to becoming the first Southern state to outlaw the death penalty. Citing the costs of death penalty appeals, the reversal rates for death sentences and the lack of drugs to perform the execution themselves, members of the Senate Judiciary Committee C reported Senate Bill 142 favorably by a 6-1 vote. The bill now moves to the full Senate for consideration. The Associated Press has the story.

Sen. Dan Claitor, a Republican and former prosecutor from Baton Rouge, introduced the bill, which would not be retroactive, meaning the 73 prisoners currently on death row would not get reprieves. “As a Catholic, I am compelled to act on a moral basis relative to the death penalty. Life, both at the beginning and at the end, must be my primary consideration as a Catholic legislator,” Claitor said in a statement earlier this month.

 

Corporate tax cut facing bipartisan opposition

President Donald Trump’s proposal to cut the corporate income tax rate from 35 percent to 15 percent isn’t dead, but it may be on life support amid bipartisan opposition on Capitol Hill. Democrats see it as a tax break for the wealthy, while Republicans note that it would increase the federal deficit. As CNN’s Phil Mattingly reports, the rules of the Senate only make the arduous task more difficult:

Well, in order (for) Republicans to move any tax cut at that level through Congress, they would have two options: find Democratic votes, or try to go through reconciliation, a budget process that would allow Senate Republicans to pass a bill with just 51 votes — or in other words, no Democratic support (Republicans control 52 seats in the chamber). The only caveat: The tax bill would not qualify for a simple majority vote if it adds to deficits beyond 10 years.

Economist Jared Bernstein, writing for The Washington Post, explains that the plan would be even more expensive than originally reported thanks to a generous new tax cut for “pass-through” businesses:

This afternoon the Wall Street Journal confirmed that the administration is planning to take the pass through rate down to 15 percent in the latest iteration of his plan. This creates a costly new loophole, and the revenue loss it generates — $1.5 trillion over the next decade — must be added to the $2.4 trillion loss from the corporate rate cut.

 

Number of the Day

$18 million – Amount of cuts to higher education under a standstill budget proposed by Republican House members. (Source: The Advocate)