Louisiana voters reject sales tax collection overhaul amendment, but approve 'tax swap'
Louisiana voters approved a constitutional amendment that would reshape the state’s tax brackets and eliminate a controversial tax deduction but rejected another proposed amendment that would have taken the first steps toward establishing centralized sales tax collection in the state, killing a reform long sought by the state’s Republican legislative leaders.
Voters also rejected an amendment that would have allowed state lawmakers to tap into a larger portion of dedicated funds to address budget shortfalls and another that would have empowered a small number of local levee districts to impose property taxes to pay for basic upkeep and improvements to their flood defense systems.
More than 51% of voters had opposed Amendment 1, which would have established the State and Local Streamlined Sales and Use Tax Commission, when WWL called the race at 9:41 p.m. At the time, 3,185 of the state’s 3,714 precincts were reporting, but only half of the Orleans Parish precincts had reported results.
More than 60% of voters in Orleans Parish, who turned out for local municipal elections in much higher numbers than voters elsewhere, effectively scuttled the reform on their own.
The amendment drew stiff opposition from New Orleans Mayor LaToya Cantrell, who told supporters that the change could allow the new state commission to delay the city’s much-needed sales tax revenues for political reasons. Sales tax dollars account for more than 30% of the city’s operating budget.
Louisiana is one of only a handful of states with a completely decentralized sales tax collection system. This leaves local taxing authorities responsible for collecting all state and local sales taxes. Depending on the parish, that duty can fall to a dedicated office of the municipal government, the local sheriff, police jury or even the local school board.
This system burdens businesses with the responsibility of paying the correct amount of sales tax to the appropriate local taxing authority.
For years, previous attempts to change the system failed because local tax collecting authorities, namely sheriffs’ offices and police juries, opposed the change, arguing that they were best positioned to understand the needs of local businesses. Furthermore, they argued that switching to a centralized system would disrupt local governments’ cash flow by requiring them to go to a state agency to get the local sales tax revenues.
The measure was a key component of Republican legislative leaders and business and industry representatives' push to reform the state’s tax system.
Voters also approved Amendment 2, which executes what Republican legislative leaders have dubbed a “tax swap.” When WWL called the race at 9:42 p.m., 55% of voters were in favor of the amendment with 3,126 of 3,714 precincts reporting.
In doing so, they allowed three pieces of legislation passed by state lawmakers last spring to take effect. Together they lower the maximum state income tax rate from 6% to 4.75% for individuals and rework the state’s corporate and franchise tax brackets, while eliminating the state’s income tax deduction for federal taxes paid.
Amendment 2 combined three complicated and consequential pieces of tax legislation passed earlier this year and presented them to voters in a single 32-word ballot initiative.
Experts from all over the political spectrum recognized the state’s federal income-tax deduction as a bad policy that destabilized state revenue. But there was less agreement about the various tax cuts also included in the reform package.
The effort was opposed by organizations that advocate for low and moderate income Louisinanans, like the Louisiana Budget Project and the Power Coalition for Equity and Justice.
The Louisiana Budget Project said the state’s current tax structure, which relies heavily on sales taxes and carves out myriad exemptions for businesses and wealthy individuals, disproportionately burdens low-income people and fails to raise enough money to pay for the services those Louisianans need most. They argue that Amendment 2 does not address those issues and instead “cements the status quo.”
Voters across the state rejected Amendment 3, which would have allowed a select few levee districts to impose a 5 mill property tax to fund their operations. The amendment was failing with 59% of voters opposed with 3,126 of 3,714 precincts reporting when WWL called the race at 9:42 p.m.
The state constitution has allowed levee boards established before 2006 to impose a property tax of up to 5 mils to offset the cost of their operations. But the eight levee districts established after Jan. 1, 2006 cannot raise that tax without the approval of voters living in that levee district.
The disparity is an unintended consequence of reforms the state made to its levee regulations after Hurricane Katrina. Three of the eight levee districts founded since 2006 have been successful in winning over voters and raising that 5-mill tax, but five have not. Had the amendment passed statewide, the measure still would have had to earn the approval of a majority of voters in each of the affected levee districts — which include portions of St. Tammany, Tangipahoa, Calcasieu, Cameron, Vermillion and Iberia Parishes — for the new taxes to take effect.
Voters in those parishes voted down the amendment by an even wider margin than the rest of the state, except for Cameron, where only half of all precincts were reporting at 9:42 p.m.
And finally, voters rejected Amendment 4, which would have allowed state lawmakers to tap into a larger portion of the state’s statutorily dedicated funds to balance the budget when the state experiences a mid-year shortfall. The amendment was failing with 72% of voters opposed with 3,242 of 3,714 precincts reporting when WWL called the race at 9:42 p.m.
Louisiana is awash with statutorily and constitutionally dedicated funds, which direct monies from certain sources to specific state programs.
In an ideal scenario, these dedicated funds ensure that high-priority programs will always have the money they need to fulfill their purpose. But these funds can also make it difficult for lawmakers to adjust when priorities change or when other valued programs are underfunded.
But in times of fiscal crisis, lawmakers have greater authority to tap into those dedicated funds to balance the state budget. Lawmakers are able to take up to 5% of each dedicated fund if certain conditions are met. Had it passed, Amendment 4 would have let them take up to 10%.
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