Gov. John Bel Edwards on Monday released his recommendations for averting next year’s “fiscal cliff,” and they hew closely to the ideas put forth by a legislative task force and other groups that have studied the tax structure. With Louisiana facing a loss of more than $1 billion in revenue due to temporary taxes that expire on July 1, Edwards is proposing to let the temporary 1 percent sales tax expire, and replace the lost revenue by broadening the sales tax base to include some services that are currently untaxed, and by increasing income-tax collections. The AP’s Melinda Deslatte:
The governor said the recommendations would create a more balanced tax policy that would stabilize state finances and offer predictable, long-term revenue streams to pay for government expenses — doing away with temporary taxes in place for the past two years and what he called the “yo-yo effect” of constant budget crises. “I am not asking for net new revenue,” he told a luncheon of economic development officials and others. “A revenue-neutral solution is what I’m asking for, so it ought to be an easier hurdle to get at.”
Notably absent from the governor’s plan is any change to the law that lets Louisianans deduct federal income taxes paid from their state returns. Louisiana is one of just three states that allow a full federal deduction, a loophole that costs the state more than $900 million a year in lost revenue and mainly accrues to the richest taxpayers. Eliminating the federal deduction has been a priority for LBP and others, but Edwards said he didn’t think the votes were there in the Legislature to make it happen. The Public Affairs Research Council weighs in with a commentary:
This idea (eliminating the federal income tax deduction) is a good one for many reasons. It allows a lower rate and a broader tax base, which are attributes of sound tax policy. It is a more competitively appealing structure versus the tax systems in other states; Louisiana’s income tax burden is not among the higher taxing states, but its high rates offer the appearance of a comparative disadvantage. This initiative also provides greater stability in our outlook for taxation and revenue streams for the future, because the fortunes of state taxpayers will no longer be tied to the fluctuations of federal income tax changes.
ITEP in Cameron Parish
The Louisiana parishes with the heaviest industrial footprints often struggle to provide basic services to their citizens, thanks in part to generous property tax breaks given to manufacturers under the state’s Industrial Tax Exemption Program (ITEP). So explains The Advocate’s Rebekah Allen in Part 2 of her “No Strings Attached” series, which focuses on a coastal parish where two companies have invested a combined $29 billion yet money is lacking for a new schoolhouse.
From 2011 to 2016, Cameron Parish’s forgone property taxes amounted to $4.2 billion — an average of $700 million a year. Incredibly, that works out to more than $100,000 for every man, woman and child in the parish, each year. The parish exempts about 10 times the amount of property taxes it collects, far and away the highest such ratio in the state. Right next door, Calcasieu Parish, home to Lake Charles, was No. 2 among Louisiana’s 64 parishes in industrial tax exemptions, with $2.8 billion given away over that same span. Between them, those two parishes accounted for more forgone property taxes through the Industrial Tax Exemption Program than the other 62 parishes combined.
Today’s final installment looks at the ways local authorities are dealing with the new authority given to them by Gov. John Bel Edwards’ 2016 executive order that reformed the program.
So far, only a handful of parishes have gotten an opportunity to exercise their new authority, a task they’ve taken on with varying levels of enthusiasm. Some groups say the shift in power has only created competition for business among parishes, while others say they’re happy to have some say in whether they give away property taxes that could otherwise pay for police protection, schools, roads, libraries and parks. Almost every tax-exemption application that has gone before a local governing authority — about a dozen projects to date — has been approved so far, leading some critics to ask whether this key reform to the multibillion dollar property tax giveaway has really changed anything.
The tax bill is a boon to the wealthy
Congress is scheduled to vote this week on a tax bill that represents a massive shift of resources from struggling families to the most powerful people and corporations in the country. The final version of the bill, endorsed by both of Louisiana’s senators and all but one of its House members, would end health coverage for millions of Americans, adds more than $1.5 trillion to federal deficits and sets the stage for deep budget cuts in the years to come. The Institute on Taxation and Economic Policy explains how Louisianans would be affected.
The final tax bill that Republicans in Congress are poised to approve would provide most of its benefits to high-income households and foreign investors while raising taxes on many low- and middle-income Americans. The bill would go into effect in 2018 but the provisions directly affecting families and individuals would all expire after 2025, with the exception of one provision that would raise their taxes.
The “Corker kickback”
Sen. Bob Corker of Tennessee stands to gain more than $1 million from a last-minute tax change to the GOP tax bill, according to an analysis by the Center for Economic and Policy Research. Corker unexpectedly came out in favor of the bill last week, after voting against an earlier version, even though none of his concerns about the deficit were addressed in the final bill. David Sirota and Josh Keefe of International Business Times have the story:
The new tax provision would specifically allow owners of large real estate holdings through LLCs to deduct a percentage of their “pass through” income from their taxes, according to experts. … Sen. Bob Corker, who was considered a potential “no” vote on the bill, abruptly switched his position upon the release of the final legislation. Federal records reviewed by IBT show that Corker has millions of dollars of ownership stakes in real-estate related LLCs that could also benefit.
Number of the Day
5 – Number of Louisiana parishes (Cameron, Calcasieu, St. Charles, St. John and Iberville) that in a typical recent year exempted more property taxes for manufacturers than they collected. (Source: The Advocate)
Editor’s note: The Daily Dime is taking a holiday hiatus. Everyone at the Louisiana Budget Project wishes our readers a safe and joyous time with family and friends.