The fate of Gov. Jeff Landry’s complicated tax-swap scheme rests largely with the state Senate, where the tax-writing Revenue and Fiscal Affairs Committee has started its review of the major bills in the package. Legislation sent over from the House would cut income taxes for individuals and large, profitable corporations while also eliminating the corporate franchise tax. To help offset the cost of these tax cuts, the bills would eliminate tax credit programs that support Louisiana’s film industry, technology companies and historic preservation projects. The Times-Picayune | Baton Rouge Advocate’s Alyse Pfeil reports:
“I think the governor rightly asked you to look at these bills as a package,” said Jan Moller, executive director of Invest in Louisiana, a policy organization that advocates for low- and moderate-income families. Moller said Louisiana already has some of the highest sales tax rates and the lowest income tax rates. “This package, of course, takes us even lower on the income tax, where we’re already low, and takes us higher on the sales tax, where we are already quite high.”
Landry’s tax plan, as proposed, would cut overall state tax revenue by nearly $700 million by 2027. But that revenue gap would grow even larger if legislators continue to balk at a plan to expand the state sales to 41 different services that are currently untaxed – or if they decide to preserve the tax credits that Landry wants to axe. The Times-Picayune | Baton Rouge Advocate’s Tyler Bridges reports that Senate President Cameron Henry is looking at ways to reshape the plan:
One approach would be to not reduce the corporate income tax rate as low as Landry has proposed. Under Landry’s plan, the three current corporate income tax rates would be collapsed to a single 3.5% rate. Another way to make the difference, Henry said, is to delay when some of the tax cuts take effect. Or legislators could reverse the recent decision to direct money from a tax on vehicle sales to infrastructure projects. Instead, that money could be sent to the state general fund. That could generate about $280 million per year, Henry said, after deducting the $40 million dedicated annually to replacing the aging Interstate 10 bridge in Lake Charles.
Most benefits of Landry tax plan will flow to wealthy
Wealthy households would be the biggest beneficiaries of Gov. Jeff Landry’s tax overhaul plan, according to new analysis from the Institute on Taxation and Economic Policy. The governor is asking state lawmakers to renew expiring sales taxes and expand the sales tax base to include everything from garbage collection and digital streaming services. In exchange, Landry wants to replace the state’s graduated income-tax structure – where the highest rates apply to the highest incomes- with a “flat” tax of 3%. ITEP’s Neva Butkus breaks down the numbers:
According to our analysis, the swap – as currently proposed – would result in the lowest-income 20 percent of Louisianans (with average annual incomes of $12,700) receiving an average tax cut of just $10. Middle-income households making $55,900 on average would receive an average $288 tax cut. Meanwhile, the wealthiest 1 percent of Louisiana households with average annual incomes of $1.8 million will receive an average tax cut of nearly $17,000 – more than a full-time minimum wage worker would make in a year in Louisiana. The tax plan also stands to benefit the wealthiest Louisianans when comparing cuts as a percentage of income. The lowest earning Louisianans will see a tax cut of just .08 percent of their income, while the top 1% receives a tax cut of .89 percent – over 11 times more generous.
Landry trying not to follow Jindal’s disastrous path
As a first-year governor in 2008, Bobby Jindal signed off on an income-tax cut that quickly drove a hole in the state budget and forced legislators to make deep cuts to programs and services. The Times-Picayune | Baton Rouge Advocate’s Stephanie Grace explains that current Gov. Jeff Landry is hoping his tax package does not not follow down the same path:
And in truth, while systemic tax reform is overdue, Landry still hasn’t made a great case for making huge changes in a brief special session instead of in the spring regular session, when they can be more carefully studied and fully debated. All lawmakers really need to do to avert immediate catastrophe is make the temporary tax permanent. But the fact that he’s trying to keep revenue from cratering in the first place suggests Landry did learn from watching what happened when Jindal threw off his doubts and followed the ideological path to disaster. The governor has already made plenty of mistakes in office and he’ll surely make more. But he seems pretty determined not to repeat that one.
Reality check: The governor’s good intentions don’t make up for the fact that the numbers on his tax plan don’t add up, and would almost certainly lead Louisiana back to the days of budget deficits and austerity measures.
Oil and gas can’t save Louisiana’s economy
The oil and gas industry accounted for 60% of Louisiana’s total revenue during the 1960s, but that number has shrunk to just 4.5% today. Despite this downtick, the Legislature is considering more tax breaks for an industry that is already highly subsidized at the state level. Floodlight’s Pam Radtke explains why Louisiana leaders are ignoring reality – and hurting the state’s economy – by their commitment to fossil fuels:
“The oil and gas industry has a hold on the popular imagination, our self-image and our politics that is way disproportionate to their actual economic impact and their impact on actual communities,” said Jan Moller, executive director of the Invest in Louisiana, a nonpartisan economic think tank. … But Moller points out that “Louisiana already has the most generous corporate, manufacturing incentive anywhere in the country … in ITEP. Now we are going to cut back the two taxes that we do get,” Moller said. Under ITEP, manufacturing industries — including those manufacturing chemicals — are exempt from paying 80% of their property taxes for up to 10 years.
Number of the Day
$10 – Tax cut for a Louisiana household with an average annual income of $12,700 per year under Gov. Jeff Landry’s tax overhaul plan. The wealthiest 1 percent of Louisiana households with average annual incomes of $1.8 million would receive an average tax cut of nearly $17,000. (Source: Institute on Taxation and Economic Policy)