One special interest group described the frenetic final hour of the just-ended special legislative session as “fast-and-furious,” which was certainly accurate as regards the session’s closing minutes. However, a better summary of the 25-day session would be “frustrating.” As the late John Maginnis often observed, lawmakers could have done less, but they ran out of time.
Legislators idled away countless hours while some of their leaders negotiated with each other and Gov. John Bel Edwards — to little avail. Enough House members dug in their heels to prevent Edwards from pushing all of his tax plan through, but they offered no concrete alternatives. By the end of Day 25, lawmakers defaulted to a time-honored fiscal Band-Aid: higher sales taxes.
They also hiked taxes on cigarettes, beer, wine and booze, taxed short-term room rentals, and reinstated taxes on telecommunications and car rentals — but that’s a far cry from authentic fiscal reform.
Consequently, my usual recap of “winnas and loozas” includes nothing but loozas this time. That has never happened in the 30-plus years I’ve been assessing the legislative carnage, but nobody can rightfully claim victory after a session that literally left Senate President John Alario in tears and the current fiscal year still some $60 million in the hole — and next year’s budget almost $800 million short. Another special session in June seems unavoidable, which also argues against anyone being declared a winna just yet.
I’ve read and heard that oil and gas “won” because severance taxes didn’t go up, but that overlooks the impact of higher sales taxes on business utilities and on manufacturing machinery and equipment, which hits oil and gas as well as petrochemical plants.
The closest thing to winnas may be the gambling and film industries. The governor’s call spared them and thus effectively gave them a bye — till the next session. By then, the list of loozas could get a lot longer.
So here we go with …
2. Business Interests — The Louisiana Association of Business and Industry (LABI) had its way with the House for the first two weeks of the session. But as the clock ticked down and the deficit still loomed large, public criticism began to mount as word spread of the state giving away more in corporate welfare (read: tax incentives) than it collected in corporate taxes. The Holy Grail for business was preserving sales tax exemptions on business utility bills and manufacturing machinery and equipment, and blocking more changes to the inventory tax rebate. The sales tax exemptions got rolled back, at least for a while — along with many other exemptions — but the inventory tax remains unchanged … for now. Meanwhile, LABI failed to block some changes to corporate income and franchise taxes. Elsewhere, businesses that collect sales taxes will get to keep a smaller percentage of their collections, and insurance companies saw one of their tax breaks reduced. Overall, LABI’s days as lead dog are over; the group instead appears to be in the dog house.
3. House Republicans — Their big win was blocking major income tax reforms. That’s hardly a win when you consider that repealing the voter-approved Stelly Plan is what started Louisiana’s descent into fiscal Hades. Equally important, for all their anti-tax, pro-cuts rhetoric, they put forth no real alternative. The shoddy House-passed budget reduction bill was gutted in the Senate, as it should have been. Worst of all, crafty Senate President John Alario now knows he cannot trust the House leaders, and that augurs ill for future House game plans — if they ever come up with one. Instead of a game plan, they mostly just played political games.
4. Louisiana’s Poorest Citizens — They’re going to pay higher sales taxes, and they won’t get an offset because lawmakers refused to increase the Earned Income Tax Credit. That, plus looming cuts to higher ed and health care, will disproportionately affect them.
5. Universities and College Students — The failure to cover all of this year’s budget gap — and up to $800 million in next year’s budget — means higher education will once again face potential cuts to the state’s TOPS college scholarship program. This will be a pressure point in the regular and next special sessions.
6. Safety Net Hospitals and their Patients — Louisiana’s safety net hospitals may have been privatized under Bobby Jindal, but without adequate public funding some of the private operators are threatening to pull out of their state contracts. This is where the biggest cuts could hit.
7. Smokers and Drinkers — The tax hikes on tobacco, beer, wine and booze will hit them April 1. One veteran observer quipped, “My advice: Go buy as much wine and beer as you can right now. You’ll need it to get through the next session.”
9. Tourism — The increased sales tax will give New Orleans one of the nation’s highest hotel-motel taxes. Tourists also will have to pay more when they stay in short-term rentals (like Airbnb) and when they rent cars.
10. Internet Shoppers — The days of tax-free shopping online are about to end as lawmakers passed legislation requiring certain vendors who sell on the Internet to collect and remit sales taxes.
If all that isn’t enough bad news, consider this: Lawmakers are back in session this week for the regular annual session, and chances are they’ll have to go into another special session in June.