The state Legislature finished its session Thursday with a flurry of activity highlighted by the final passage of a complex package of tax bills that would do away with a longstanding tax deduction in exchange for lowering the rates paid by people and corporations. The plan – which Gov. John Bel Edwards is expected to sign – would eliminate the ability to deduct federal income taxes on state returns. Income tax rates would be cut across the board, with the biggest cuts for the highest incomes. The AP’s Melinda Deslatte has more:
Jan Moller, head of (the Louisiana Budget Project), objected that the tax changes would benefit business and higher-income taxpayers more than low- to moderate-income taxpayers. He also criticized triggers in the bills that could lower corporate franchise and personal income tax rates in later years if Louisiana sees certain revenue growth. “It puts tax cuts at the front of the line,” Moller said. “I think it’s bad policy for 2021 legislators to make this decision for future legislators who may have different priorities,” Moller said.
The Advocate’s Tyler Bridges notes that voters will have the final say on the matter in the Oct. 9 statewide elections, but that the ballot language is misleading.
The ballot language that voters will see does not mention a provision that aims to ratchet down tax rates if tax collections and personal income growth are higher than expected and if the state rainy day fund is filled to a certain amount.
Deslatte has a helpful overview of the session, where lawmakers also approved a package of budget bills that raise public school teacher pay, established the rules for legalized sports wagering and tangled over a range of social issues.
Fights over social issues — such as how to address police misconduct and how to teach issues of race in schools — provoked racial tensions in the House mid-session that threatened to derail the tax restructuring priorities of Schexnayder and Republican Senate President Page Cortez. But Schexnayder, who was elected with the help of Black lawmakers, managed to steer the chamber through the feuds, at least enough to broker the tax deals.
LBP Executive Director Jan Moller said legislators missed an historic opportunity to address longstanding inequities in the state’s tax structure.
Legislators could have used the revenue gained by eliminating this deduction to make new investments, or to reduce racial disparities in our tax system by reducing the state sales tax. Instead they used the revenue to cut income-tax rates for individuals and corporations. … The federal relief dollars that are helping Louisiana avoid budget cuts will soon be gone, and the Legislature will once again struggle to pay for basic services. The Legislature could have taken important steps to avoid this fiscal cliff, but chose not to do so this session.
A bad deal for laid off Louisianans
In the final hours of session, representatives greenlit legislation that would end the federal $300 per week benefit going to unemployed Louisiana residents one month early in exchange for a $28 increase to the maximum weekly benefit amount. Louisiana’s unemployment benefits are among the most meager in the country, offering people who have been laid off through no fault of their own a maximum of just $247. Even with a $28 boost, Louisiana’s UI benefits would still leave the state’s benefits near the bottom of national lists. Sam Karlin from The Advocate dissects the bill.
Republicans largely supported the bill after killing a previous effort to raise the state’s miserly state benefit by $28 a week in exchange for replenishing the state’s unemployment trust fund. … Jan Moller, head of the Louisiana Budget Project, said the Legislature has been “extremely generous to businesses,” pointing to hundreds of millions of dollars already appropriated to bail out the state’s unemployment trust fund. “Taking away federal unemployment benefits won’t help Louisiana’s economy; in fact, it will do the opposite by taking away resources from people in need who would spend it in their local communities on basic necessities,” Moller said. “The least they could have done is let people who lost their job through no fault of their own keep the benefits that Congress appropriated.”
Supporters argued that the federal supplement is causing a worker shortage. Labor economists and advocates say the real problem is the lack of jobs that pay a livable wage. Eli Rosenberg from the Washington Post spoke with 12 business owners who raised their wages about how this changed their worker pool.
Many of the business operators interviewed said that the decision to raise their employees’ starting wage was not motivated primarily by altruism or a desire to do right: It just made good business sense. They said wage increases would help attract stronger candidates, reduce turnover and elevate company morale and culture — important for customer-facing businesses such as restaurants.
Farewell to the “Pink Tax”
Louisiana has long exempted groceries, prescription drugs and home utility bills from the state sales tax. Soon menstrual products and diapers could join the list of basic human necessities that aren’t subject to the tax, provided Gov. John Bel Edwards signs House Bill 7. The bill by Rep. Aimee Freeman won final approval on Thursday despite opposition from some Republicans. Wesley Muller from the LA Illuminator reports:
If Freeman’s bill becomes law, consumers in New Orleans would pay a total of 2.5% in sales taxes on “pink” products because the New Orleans City Council has already enacted the local pink tax exemption on its portion of sales tax. The sales taxes from the School Board and RTA remain. A New Orleans shopper buying a $10 pack of sanitary pads would see the current applied sales tax drop from $0.69 to $0.25; a shopper buying a $50 box of disposable diapers would see the sales tax drop from $3.47 to $1.25.
Shortchanging hospitals to pay for roads
A compromise bill approved in the final minutes of the legislative session would divert $300 million a year from the state general fund – where it supports education, health care and other services – to pay for road construction. The bill resulted from lawmakers’ continued refusal to raise the state’s gasoline tax, which has lost more than 60% of its purchasing power since it was last increased more than 30 years ago. The Advocate’s Will Sentell sorts through the numerous changes made to House Bill 514 on its way to the governor’s desk, where its fate is uncertain:
The vote followed days of behind-the-scenes meetings between Edwards and legislative leaders, including Wednesday evening and early Thursday morning. … One of the key sticking points was whether lawmakers could craft a plan that Edwards could embrace without worries that it would drain the general fund of needed dollars for key state services. The legislation includes provisions aimed at keeping that from happening.
Number of the Day
3.9 million – The number of people who will lose the $300 per week in enhanced federal unemployment benefit in the 25 states that are moving to end participation in the program. (Source: National Employment Law Project)