Louisiana’s Everlasting Sales Tax Debate

If the Louisiana Legislature wants to take the public's temperature on the popularity of sales taxes, the elections held in 46 parishes this past weekend offer a quick and dirty read. Voters defeated 80 percent of the ballot initiatives on Saturday that promoted either renewals, rededications or increases.

Only two parishes — Natchitoches and Richland — opted to pay more in local sales taxes back home. That a combined 2,600 voters participated in these two elections is a problem all by itself, but the turnout certainly doesn't suggest any enthusiasm for this type of government money-grab.

Meanwhile the electorates in Caddo, Calcasieu, Lafayette, Lafourche, Lasalle, Livingston and St. Tammany parishes all decided to shoot down similar sales tax initiatives. (Some by very small margins, like 19 votes in Lafourche and 119 votes in St. Tammany.)

Don’t try to read too much into the election results. As an overview, they don’t represent a scientifically-sound snapshot of the public's mood on the issue of sales taxes in general.

Yet the results do clearly show how a sampling of nine diverse parishes, on Saturday, April 29, 2017, overwhelmingly yielded negative reactions to the question of tinkering with local sales taxes.

The elections are relevant and timely because the Legislature — once again — is trying to decide what the state sales tax structure should look like. In fact, it may become the sticking point of this year’s regular session.

Last year lawmakers added a temporary increase of one penny to the state’s four-penny sales tax. Why? Because the state was facing yet another budget shortfall and sales taxes are a way that government officials can get cash in a hurry.

The resulting transitory revenue, along with that fifth penny, is set to expire in 2018, a reality that has Gov. John Bel Edwards urging lawmakers to find a replacement for the money that will disappear. In response, members of the House and Senate are wading through the knee-deep politics of this ongoing session and hoping a solution surfaces soon.

Thus far an answer to this “fiscal cliff” — a loss of $1.3 billion next year, due primarily to the change in the state sales tax — has been difficult to come by. This is not comforting news as the regular session quickly approaches its midway point. (Adjournment is scheduled for June 8.)

Then again, if it weren’t for the proverbial last minute, lawmakers would never get anything done. So we wait.

The fallback, and probably the most convenient, option for lawmakers would be to simply renew the additional penny of sales tax until after 2019, when they all come up for re-election again. That would punt the headache to the next governor and Legislature, which probably wouldn’t create the best optics for those in this current term.

Still, any serious conversation about the so-called fiscal cliff and the $440 million deficit the governor has prescribed to the next fiscal year eventually comes back around to the idea of renewal. In other words, it’s a possibility.

It’s worth noting here that some lawmakers agreed to add the temporary penny of sales tax in 2016 with the understanding that true budget and tax reforms would be passed this year. Indeed, many representatives and senators are still reaching for that brass ring.

But they’re also looking into ways to squeeze more money out of the state sales tax structure. In addition to the proposed renewal of the one new penny, a handful of lawmakers are also exploring keeping just a portion of that temporary increase. Others are investigating lowering the rate below four pennies and removing exemptions. Some even want to expand the sales tax base, so that more services are taxed.

Then there’s the politics involved. If conservative special interests can frame the extension of the penny as a true tax increase, that option might start creating more heartburn for Republicans. On the other hand, many Democrats view the sales tax as a regressive tax, so some Republicans see the extension as a way to stick it to Edwards, who needs to protect his Democratic base.

The governor has said repeatedly that renewing the fifth penny of state sales tax is not a road he wants to travel. But if it’s the only fiscal solution the Republican-dominated Legislature sends him, Edwards may let it stand. Aside from calling lawmakers into a fifth special session, he may have have few other choices.

That said, any legislative decision to move forward with an extension of the fifth penny, or any portion of it, will signal an inability to tackle true reforms in the areas of income taxes, tax breaks, funding to local governments and much more. It will also send a clear signal that this term of state government will ultimately be remembered for operating as an exercise in politics, rather than an exercise in policymaking.

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