A Budget Debate Defined By One-Sixth Of A Penny
BATON ROUGE— It’s only one sixth of a penny.
That’s all that divides the House and the Senate over how much of an expiring penny of sales tax to extend.
That extra sixth of a penny would cost Louisiana residents 17 cents on a $100 purchase. If you shop for school supplies for a high school student, it would add 67 cents to the average $392 bill. It would boost the cost of a $1,299 MacBook Pro by $2.21 and add $69.70 to the $41,000 sticker price of a well-equipped Lexus ES sedan.
It also would raise $150 million a year to avert cuts to TOPS, health care and other services.
The disagreement over whether to extend one-third or one-half of a cent prompted the House on Monday to reject Senate versions of revenue and budget bills. That sent both of them to conference committees where members from both chambers were trying to work out the differences as the clock ticked down toward the end of the special session.
The Senate wants to renew half a cent to raise $515 million and limit cuts to state agencies next year, while House Republicans, who want to cut the size of government, want to stick with the third of a cent, forcing larger cuts.
The House’s smaller sales tax increase would raise $365 million of the $648 million that Gov. John Bel Edwards, a Democrat, has said is needed to avoid any cuts.
Both houses would raise a little more money through other means. But analysts say that even though the $150 million difference in sales tax levels is only about 1.5 percent of the state’s annual expenditures, philosophical and political differences between the parties have amplified the debate, as has the fact that tax measures require a two-thirds vote to pass in each chamber.
“We should be close enough in terms of dollar amounts that we ought to be able to do this,” said Barry Erwin, President of the Council for a Better Louisiana, a non-partisan group. “If we can’t, I think it’s a real indictment of all of our leaders to come together for the good of the state.”
Erwin said the state has been in the same budget crisis scenario before. The difference this year, he added, is that “a portion of the House has grown more fiscally conservative.”
He said some House Republicans simply want to shrink government, but “there’s not a majority of the Legislature that would be satisfied with the level of funding if it was only a third of the penny,” he added.
Jan Moller, head of the Louisiana Budget Project, a nonprofit group that monitors how public policy affects Louisiana’s low- to moderate-income families, chided legislators supporting only a one-third tax renewal and their “petty politics.”
“It’s not about growing government, it’s about maintaining vital services,” he said.
Jim Richardson, an LSU economics professor, said the difference between the two sales tax levels would cost a family making $25,000 an additional $7 each year. A household income of $50,000 would pay about $23 more a year.
Many Republicans disagree, saying the fight to limit the increase to one-third of a cent is about principles. Some say state government needs to become more efficient. They also argue that keeping the taxes as low as possible could spark economic growth and eventually boost state tax collections.
“I continue to defend the taxpayers against a tax and spend agenda which aims to grow the size of government,” said Rep. Blake Miguez, R-Erath, in a tweet Monday. “State government should be more focused on the economic growth of the private sector, which ultimately funds the state treasury.”
Rep. Lance Harris, R-Alexandria who sponsored the House version of the sales tax bill, tweeted Monday morning that he had just told Edwards that the House GOP “was sticking to one-third” of a cent.
The two-thirds rule means that any revenue-raising measure requires 70 votes in the House, which has 61 Republicans, 41 Democrats and three Independents. It is difficult to get that many votes in the House on sales taxes since a number of Republicans have refused to vote for any kind of tax increase and Black Caucus members are wary of sales tax increases.
Caucus members argue that the sales tax increase is regressive and overly-burdensome for low-income constituents.
Under pressure from caucus members, the Senate on Sunday revived a plan to expand earned income tax credits, at an annual cost of $21 million, to offset some of the impact of any sales tax increase. It was tacked onto a House bill as an amendment, circumventing the Ways and Means Committee that had killed three similar bills.
Many House Republicans object to that addition, and that has been another sticking point in the negotiations. The House voted 53-49 to reject the amended version of the bill.
Edwards, the only Democratic governor in the Deep South, faces re-election next year, and that also is influencing the politics over the revenue bills.
"We don't want a Democrat to get re-elected, and we don't want to give him a political win by doing tax reform — that was something that was told to me," Rep. Barry Ivey, R-Central, said in an earlier special session that collapsed in March.
Erwin said that if it appears that “Democrats are the ones who cannot come to the table and compromise it, hurts him,” though Edwards currently has strong polling numbers for a conservative state.