A measure that seeks to erode local control over lucrative property tax breaks for manufacturing corporations advanced out of a House committee with strong backing from business groups. House Concurrent Resolution 3 seeks to undo changes Gov. John Bel Edwards made to the Industrial Tax Exemption Program, which gave local authorities more say over whether to forfeit property tax revenue. The rules proposed by Rep. Rick Edmonds would replace local control with a three-member “review board” representing local entities. This means that a locally-elected school board could be forced to surrender its property tax millage to large manufacturing corporations if the two other members of the board approve of the exemption. The Advocate’s Sam Karlin reports.
Since Edwards’ revamped the ITEP program, a handful of companies have been rejected by locals for ITEP applications. ExxonMobil’s rejection for two tax break applications by the East Baton Rouge School Board set off a wave of protest by industry groups, who once supported the new rules but now argue more changes are needed. “This resolution is in response to those communities saying no,” said Kendall Dix, campaign organizer for Healthy Gulf. Guy Cormier, head of the Louisiana Police Jury Association, argued if businesses want to be exempted from local property taxes, the least they can do is meet with three local bodies to win their support.
Another cliff on the horizon?
It took Louisiana legislators nearly a decade – and three special sessions in 2018 alone – to stabilize the state budget and resolve the structural shortfall that resulted from misguided income-tax cuts in 2007 and 2008. But efforts are already underway to unravel this hard-fought compromise by repealing or redirecting the 0.45 percent state sales tax that helped fix the problem. The Advocate’s Mark Ballard highlights two bills – House Bill 584 and House Bill 599 – that could throw Louisiana’s budget back into the state of chaos that it existed in for the better part of a decade.
House Bill 599, by House Majority Leader Lance Harris, would gradually scale back the 4.45 to 4 cents; and House Bill 584, by Rep. Dodie Horton, R-Haughton, which would flat do away with the additional sales tax. House Ways & Means Committee Chair Neil Abramson hasn’t scheduled the two bills for hearing, saying Thursday the committee hasn’t made it through the avalanche of legislation that was filed. The session must end a little more than five weeks from now, on June 6.
Meanwhile, tax cut bills are flying out of the normally tight-fisted House Ways and Means Committee. Three bills advanced on Monday that would create a flat tax to replace Louisiana’s current graduated income tax structure. All of the bills would do away with the ability to deduct federal income taxes from their state taxable income — a sensible and long-overdue reform that would be undermined by the flat tax provision. As Ballard reports, eliminating the federal tax deduction would make Louisiana’s government finances less sensitive to the whims of Washington, the flat tax proposals would lead middle income taxpayers to owe more to the state, while high-income earners get another tax break.
Jan Moller, of the Louisiana Budget Project, said he is heartened that the three Republicans have worked hard to end the federal deduction and to pursue the flat tax without blowing a hole in the budget. “But we have some heartburn with flat tax reforms,” Moller said. Flat tax proposals, at least when aimed at collecting the same amount money as the existing systems leans towards a regressive system. Usually taxpayers with little income and those with the highest incomes see a reduction in their tax bills. But the middle-income taxpayers – those making $40,000 to $60,000 annually – see a slight increase, he said. But Moller is withholding final judgment until the three legislators craft the final frameworks and he can put pencil to paper. “We’re watching all of these bills very carefully,” Moller said.
GOP tries a new approach to budget
While lawmakers are keen on investigating other agencies’ spending habits, they have no problem requesting additional revenue while sitting on unspent money of their own. The House Appropriations Committee spent a day of its budget hearings last week getting a clearer picture of the amount of revenue that was appropriated, but never spent. According to the House’s nonpartisan financial analysts, agencies only spent $26.8 billion – 9 percent less – of the $29.3 billion state operating budget. State agencies argue that their unspent budget authority gives them the flexibility they need to fulfill their missions even when they take in less in taxes and fees than expected. The AP’s Melinda Deslatte reports.
The extra spending authority gives agencies wiggle room to collect more money without having to return to lawmakers for permission to spend it midyear. They also can shuffle dollars to spend money they’d otherwise lose at the end of the year, while hanging onto other cash they can hold over in accounts with minimal legislative oversight. Republicans say that gives lawmakers who control the purse strings too little information about actual spending. “The open checkbook days are going to be over, where we give you the excess authority and you carry it over from year to year,” Rep. Johnny Berthelot, a Gonzales Republican, told one agency.
Agencies have cited numerous reasons for the discrepancy, such as overestimating tax and fee collections or difficulty calculating who will need services and what they’ll use.
“It’s impossible with 357 revenue sources to get it to the mark,” said Cindy Rives, chief financial officer for the health department, which didn’t spend $842 million of the budget authority it had last year, most of it federal money. Other agency leaders talked about building in excess spending capacity so they’re ready to receive federal disaster aid if a devastating storm or flood strikes.
Universal health care in America is affordable
Opponents of universal health coverage often say the cost is too high, and cite the taxes paid by citizens in countries where health care costs are largely paid by the government. But if you factor in the amounts deducted from Americans’ paychecks in the form of private health insurance premiums as part of the total “labor tax” rate, it’s clear that workers in the United States already pay some of the highest and least progressive labor taxes in the developed world. The New York Times’ Matt Bruenig explains:
Just how heavy is the burden placed on American workers by employer insurance premiums? By combining data from the O.E.C.D. Taxing Wages model with data from the Medical Expenditure Panel Survey, we can see what percentage of each worker’s compensation — a figure that includes cash wages as well as the taxes and benefits employers pay on behalf of their employees — goes toward taxes and health care, and how progressive these payments really are. What this data shows is that lower-income workers, higher-income workers, single workers, and married workers with children all contribute around 40 percent of their pay toward taxes and health premiums. And when those health care costs are taken into account, the less well off no longer pay less than high-earners, as they do in taxes alone. So, while opponents of comprehensive plans like Medicare for All claim those plans will greatly burden middle-class families, the truth is that we already have an unfair system. Middle-class workers in America are charged the same health insurance fees as upper-class workers despite the vast income differences between the two groups, and pay more of their earnings toward taxes and health care than workers in many wealthy countries.
Number of the Day
$703.3 million – Amount of money in tax breaks that ExxonMobil received from East Baton Rouge parish, school, and sheriff authorities over the past 20 years, under ITEP. ExxonMobil lost approximately 1,900 jobs during the same timespan. (Source: The Advocate)