It is now painfully obvious that the cornerstone of Gov. Bobby Jindal’s proposed solution to the state’s $1.6 billion budget gap is going nowhere fast among state lawmakers. In fact, the governor’s proposal to scale back state refunds to businesses that pay local inventory taxes is pretty much DOA.
As expenditure savings go, Jindal’s idea was big, even bold. I give him credit for that, because he otherwise has been among the most risk-averse governors Louisiana has ever had. Now, in his final year, he decided to step on the toes of the business community. The pushback has been enormous.
The Louisiana Association of Business and Industry (LABI) ranks among the most powerful lobbies at the Capitol, and LABI is railing non-stop against Jindal’s idea. I wouldn’t be surprised to see Jindal “park” his proposal, as he did with his ill-advised plan to eliminate the state income tax two years ago.
Meanwhile, there’s growing sentiment to repeal the inventory tax altogether. Repealing the tax will have no impact whatsoever on the state budget because it’s a local tax, but business owners love that idea. Repeal would, however, put some parishes in the same desperate budget straits that the state is trying to navigate right now. Nothing like spreading the pain.
Politically, repealing the inventory tax would buy lawmakers points with LABI just in time for the fall elections. They’ll need all the points they can get if they don’t solve the larger problem of covering the $1.6 billion budget hole without doing further damage to higher education and health care. Voters are pretty upset about the cuts already visited upon public universities and hospitals over the past six years.
Friday (April 3) was the last day to pre-file bills, and the final hours saw all manner of ideas tossed into the hopper. Some are intriguing. Others appear to be “placeholder” measures that were filed in case legislators think of something later and need a bill that can be amended to accomplish some yet-to-be-devised fiscal rescue.
In the absence of a palatable plan from Jindal, lawmakers are mostly throwing jelly at the wall and hoping something will stick. Many are hoping Senate President John Alario, the dean of the Legislature and the most knowledgeable (and most capable) budget fixer in the state, will come to the rescue — as he has done many times in the past. Alario says he’s never seen things this bad.
Here’s a look at some of the better ideas being kicked around:
• State Sen. Robert Adley, R-Benton, has filed bills that would generate revenue by eliminating various tax credits, tax exemptions and tax exclusions on everything from the inventory tax to sales taxes to income taxes. Adley’s bills will certainly please those who say Louisiana has been too generous with tax credits and exemptions.
• State Sen. JP Morrell proposes a constitutional amendment similar to one that I suggested two weeks ago. It would eliminate most but not all constitutional revenue dedications, thereby freeing lawmakers to make cuts in places other than education and health care. Voters would consider the amendment in October, so the idea does not address the immediate crisis.
• A tax study commissioned by lawmakers contains a plethora of recommendations. Among them: eliminating many sales tax exemptions; expanding sales taxes so that they apply to services as well as goods; having one entity (the state) collect all sales taxes; eliminating many state income tax deductions and credits; reducing the top corporate income tax rate while reforming the corporate tax code; phasing out the corporate franchise tax; capping the industrial tax exemption, requiring local government approval of each exemption, and giving exemptions a shorter (7-year) duration; putting a “sunset” provision on all of tax credits; capping film tax credits; eliminating Enterprise Zone initiatives; eliminating the horizontal drilling tax exemption; and aligning taxes on cigarettes, alcohol and gasoline to national or regional averages.
All of these are good ideas for the long haul, but so far there’s no consensus solution to the immediate crisis.