Louisiana’s legislators SAVEs Jindal’s presidental aspirations

16th June 2015   ·   0 Comments

By Christopher Tidmore
Contributing Writer

The 2015 Regular Session clos­ed at 6 p.m. on Thursday June 11 with Louisiana legislators adopting a complicated ‘paper fiction’ that allowed Gov. Piyush Jindal to keep his no new taxes commitment to Grover Norquist’s anti-tax Americans for Tax Reform, and not pay the resulting price on the GOP campaign trail.

Yet, in doing so, the legislature missed an opportunity to raise taxes in the short term in exchange for a long-term phase out of the Corporate Franchise Tax, a move that was equally kosher for Norquist and Jindal — and would have made Louisiana more competitive in business attraction.

The House, at the begging of university heads, enacted the much criticized SAVE higher education tax credit. Formally entitled “Student Assessment for a Valuable Education,” the credit exists only on paper. In no way does it lower taxes for students, families, or local businesses, yet it does serve the purpose of balancing out tax and fee increases under Americans for Tax Reform rules on ‘revenue neutrality.’ In theory, it institutes a fee of about $1,500 per higher education student, but students wouldn’t have to pay anything because an offsetting tax credit for the $1,500.

Nor would universities receive any new money, yet the Treasury could claim the tax credit applied against the other new taxes when calculated over 220,000 higher ed students. Twenty-nine Senators had passed the measure several weeks ago, but State Represen­tatives across the hall balked at the concept of enacting a law that did nothing save for rescuing Jindal’s bleak presidential chances.

At least, until late Thursday afternoon. Jindal himself made a rare appearance on the House floor, speaking with legislators and reportedly warning in the politest terms not to attempt to pass legislation that he would be forced to veto. That was enough to convince House members, who had resisted passing the SAVE credit to switch their votes to ‘aye’ out of a worry that they might not have the two-thirds majority to override a Gubernatorial veto in a July 21 veto session.
In doing so, the House surrendered on its proposal, authored by Rep. Cameron Henry (R-Jefferson), to phase out the Corporate Franchise tax over five years in exchange for a massive tax sales and tobacco tax increase this year. When the bill crossed to the Senate, though, President John Alario pronounced it dead on arrival due to the perceived long-term fiscal costs.

Whereas the House had fo­cused on several permanent tax increases to plug most of the $1.6 billion deficit in exchange for the Corporate Franchise tax phasing out over five years, the Senate instead opted to re-impose several pennies in sales taxes for just the next couple of years, particularly on energy taxes from which corporations have been exempt for a decade, and embrace SAVE as the offset.

Essentially the Senate’s plan returns to the tax status quo early in the next gubernatorial administration in most ways other than reforms in the state’s business incentive tax credit programs and a permanent hike of $.50 cents per pack on cigarettes. Henry’s proposal, passed by the House, in contrast would have reduced the Corporate Franchise Tax by just more than $30 million next year in exchange for hundreds of millions of dollars in mostly permanent tax increases in fiscal 2015-2016.

This swap would have cost the state $912 million over five years, roughly the same amount as this year’s proposed tax increases — and under Grover Norquist’s rules, would constitute a ‘revenue neutral’ change. At the end of five years, the new taxes would roughly equal the revenues lost from the Corporate Franchise Tax.

Louisiana is one of only six states that levies a Corporate Franchise tax directly, affecting competitiveness. Henry reasoned that the state would institute the same taxes ultimately that it was losing, and that oil revenues, down by almost $400 million this year, would have rallied by that point, boosting the health of the State Treasury overall.

Ultimately, the House caved on Thursday and passed SAVE, 57-43, creating a $280 million offset on paper for $370 million in new taxes.

Besides sales taxes on business utilities, which will expire in three years, the House and Senate agreed to reduce most state tax business credit programs from the Theatrical and Live Performance Credits to those for Fracking by just over a quarter.

The film tax credits were limited to $180 million per year, far below the nearly $250 million spent in the last 12 months, and the new cap retroactively applies to credits that have already been issued. (The move led Sen. JP Morrell to charge that the final version leaves so little money in the budget for future productions that it “ab­so­lutely kills the film tax credit,” and potentially Hollywood South itself.)

Cigarette taxes will go from 36 cents to 86 cents per pack. The final budget amounts to just over $24 billion. Tax breaks were passed for Historic Preservation, Corporation, and even Bakery owners this session. However, the effort by Rep. Walt Leger (D-Orleans) to double the Louisiana Earned Income Tax Credit from 3.5 percent to seven percent failed on a rare party line vote. Only four Republicans supported. Almost every other vote this session divided the two parties.

Bobby Jindal announces his candidacy for the Republican nomination for President on June 24 in New Orleans.

This article originally published in the June 15, 2015 print edition of The Louisiana Weekly newspaper.