Lawmakers Consider Boosting Sales Tax Higher To Fill Budget
BATON ROUGE (AP) — Louisiana's sales tax is expected to grow by at least a penny on every dollar to help balance the state budget. But with other tax measures stalled in a special legislative session, some lawmakers are proposing to temporarily boost the sales tax even higher.
House leaders unable to rally support for other taxes to bail out the budget are returning to Louisiana's sales tax. They're floating an increase up to two pennies, rather than the one penny that has already won support from the House and Senate.
"We're modeling different rates and different terms," said House Speaker Taylor Barras, R-New Iberia. "It would be as short a duration as we could make the model work with."
The tax increase would lessen over time — disappearing anywhere from two to five years under varying scenarios — until lawmakers can take a larger stab at rewriting the overall state tax structure.
It's attractive to Republicans because it doesn't face opposition from the largest business lobbying groups. But it's unclear if a bigger sales tax hike can gain backing from enough Democrats to win passage, amid concerns the tax hike would heavily hit the poor.
"If the idea is simply to increase the sales tax by an additional amount to avoid raising taxes on industry, I don't think any Democrats are for that," said Sen. J.P. Morrell, D-New Orleans, chairman of the Senate tax committee.
With the special session ending Wednesday and the budget problems still unresolved, lawmakers are scrambling to reach a deal.
Senate President John Alario, R-Westwego, had hoped the budget rebalancing effort wouldn't rest solely on sales tax increases. But he said it could be "the only thing that keeps the ship from sinking right under us at this point."
"Time is closing on us, and it's becoming one of the fewer options available," Alario said.
Gov. John Bel Edwards' revenue secretary Kimberly Robinson said the administration favors the mix of tax changes it proposed but is discussing the further boosted sales tax. She said it would have to be coupled with increased tax credits for the working poor.
The Democratic governor called the 25-day special session to close gaps in Louisiana's budget estimated to reach $900 million this year and to top $2 billion in the fiscal year that begins July 1.
Lawmakers have agreed to patchwork financing and spending cuts. But they've not agreed on enough taxes to fill the remaining holes, leaving colleges and health services at risk of steep slashing.
A modest cigarette tax increase and a measure aimed at boosting sales tax collections for online purchases are among the only tax bills to have reached the governor's desk. House Republicans have bottled up other tax changes sought by Edwards, leaving senators — who are more open to taxes — stymied because most tax bills must begin in the House.
Louisiana charges a 4 percent sales tax rate on purchases, or 4 cents on each dollar paid. Local governments add sales tax on top of that. Both the House and Senate have supported a 1 percent increase to the state rate starting April 1, a tax hike backed by Edwards. But a final version of the bill hasn't been agreed upon.
Sales taxes are attractive because they raise large amounts of money quickly. The 1-cent increase is estimated to bring in $215 million for this year's budget and more than $880 million annually. Critics say that would disproportionately hit the poor.
Alario and Barras said the sales tax increase would fall in a split between individuals and businesses, suggesting that business wouldn't escape the impact of taxes to balance the budget. Morrell said businesses can pass along tax increases to their customers or use other tax breaks to offset the tax hike.
"Though business on paper will pay its fair share, they have plenty of ways to shift their burden," he said. "The problem is a poor person buying products can't shift their costs. They just have to eat it."
– by AP Reporter Melinda Deslatte