Medicaid poison pill kills La. Legislative special session
12th March 2018 · 0 Comments
By Christopher Tidmore
Contributing Writer
The key moment of the failed legislative special session was Friday afternoon, March 2nd, when New Orleans Democratic Rep. Walt Leger came up short in his attempt to limit itemized deductions—and produce an additional $79 million in revenues. His measure narrowly lost, 50-51. He needed just 53 votes, a bare majority vote, but a victory which was also key to convincing members of the Legislative Black Caucus to reverse their opposition to a temporary sales tax renewal.
On the previous Wednesday, the State House had 38-67 to rejected Rep. Stephen Dwight’s proposal to set the state sales taxes at 4.25 percent, amidst almost universal Black Caucus opposition. The proposal would have increased taxes a quarter penny but down from 5 percent currently scheduled to expire July 1. The Lake Charles Republican needed 70 votes to pass, but was steadfastly opposed by the Caucus, as well as 27 members of his own party—who swore to oppose any tax increases.
REP. LEGER
By Sunday night, it was obvious that the Leger had actually lost more ground on the Right, amidst heavy lobbying by anti-tax groups like the “Club for Growth”. Grover Norquist, promoter of the infamous “no new taxes, ever” pledge, tweeted, “Louisiana taxpayers are counting on the legislature to protect them from money-hungry John Bel Edwards.” State director of the Koch brothers-backed Americans for Prosperity, John Kay, tweeted out “I wouldn’t vote for income tax changes if I were y’all, #lalege.” When Leger’s income tax measure was reconsidered, the final House vote was 49-49.
Perhaps, both the House Democratic Speaker Pro Tem and his allies in the Edwards Administration expected too much of conservatives. Regardless of the outside-libertarian lobbying, most of Leger’s fellow legislators had won the 2007 election specifically promising to repeal the Stelly plan. The Foster-era tax reform’s limitation of itemized deductions was hated by self-employed middle class voters, who saw proportionally higher income tax hikes than their income might have warranted. Nevertheless, without these conservative legislators falling on their sword, members of the Legislative Black Caucus generally refused to correspondingly back a sales tax renewal, forcing an adjournment of the special session two days early.
It was not just Republicans with an antipathy to any form of return to the Stelly plan. House Ways and Means Committee Chair Democrat Neil Abramson represents a fiscally conservative, socially liberal Uptown New Orleans district. Like his constituents, his own philosophical stands on taxation tend more to reflect his university area-electorate, Still, Stelly was hated, even by the nominal “limousine liberals” of Uptown, so much that Abramson was a no vote.
As Abramson said just prior to casting his ballot, “Ahead of today’s votes, I wanted to shed some light on the Stelly tax plan. Be wary of the sound bites that will be flying around about a return to the Stelly tax plan, which would be deeply harmful to my constituents and others. These changes were proposed in 2016, and the non partisan Legislative Fiscal Office crunched the numbers based on actual income tax data from the Louisiana Department of Revenue. Families who made $40,000 would see a 30 percent increase in the their income taxes. Families earning over $1 million would see a 12 percent increase. The middle and lower middle classes would see 300 times more in income taxes than higher income families. Two years later, here we are again.”
The Uptown Democrat also aimed his fire at Gov. John Bel Edwards’ proposal, that in addition to Leger bill, would lower the threshold of state income tax rates. “A return to the Stelly plan would mean ‘Compressing the brackets,’ which means that the state income tax rates of 2, 4 and 6 percent would kick in earlier at income levels of $12,500, $25,000, and $50,000 rather than at the current income levels of $25,000, $50,000, and $100,000. Lowering Louisianians’ ability to apply federal deductions (including mortgages, charitable contributions, etc) would mean that families who currently deduct 100 percent would lose at least 50 percent of the deductions and pay much more in taxes.”
It was not that Abramson was against all taxes. He joined the GOP leadership, if not the rank and file, to extend some of the sales taxes. “I do believe we need to address the immediate budget crisis so I agreed to a compromise proposal that would continue — for 3 years only — a small portion of the temporary new penny tax and some of the sales tax exemptions—both of which expire on July 1 to get us through this crisis,” he continued. “I also believe a limited state Constitutional Convention must be held over the next two years because we simply must reform the system that puts the things that Louisianans value, such as education and our medical system — at such a disadvantage — and I will be pursuing that again in the upcoming regular session.”
That was a long-term solution though that did little to erase this year’s deficit. The Trump tax cuts had the unexpected impact on Louisiana and six other states that allow taxpayers to file federal deductions on their state returns. It increased revenues by $301 million this year. The deficit is $994 million. And the special session alone cost $900,000.
Defending his bill on the floor, Leger said, to explain his bill, “If you itemize deductions, this bill will no longer allow you to deduct this year the state and local taxes you paid last year… Federal law doesn’t allow you to deduct federal taxes paid. Why should the state allow it?” Leger went on to remind House members this was a structural tax reform recommended by every one of the task forces the legislature had set up to look into Louisiana’s tax structure.
Leger’s legislation might have been able to pick up a couple of more Democratic votes if he managed to unchain his bill from two of the Republican-pushed budget reforms that have been linked to his bill, HB 8, without his approval. These would have required Medicaid recipients to confirm their income via past tax returns, and put work requirements on Medicaid.
“Remove HB 2 and HB 3. Leave the rest,” Leger said. “Don’t force members who have expressed their will on those two bills to say no again. Those bills have already gone over to the Senate, but I’m afraid it will grind this whole process to a halt if we don’t remove these two.”
Shreveport Republican Rep. Alan Seabaugh, the author of the amendment shackling Leger’s bill to HB2 and HB3, led the opposition to “de-linking,” and triumphed 47-52. Still, Leger’s warning proved prophetic. Ultimately on that Friday afternoon, four Black Caucus members in the House voted against Leger’s income tax deduction legislation because of the Medicaid restrictions, and additional pressure from the governor could not change their minds.
Alan Seabaugh cast one of the votes to kill Leger’s bill, interestingly ending the chances of the Senate passing his Medicaid reforms. “This isn’t the time to do this,” he insisted on the floor, calling for opposition to the legislation he successfully amended. “We don’t know the numbers on the federal tax reforms yet. Once we have those, and new revenue estimates, then we might not even need any additional revenue.”
“What we do know — everybody knows — is that the $994 million is not an accurate number. The governor got up here and told a bald-faced lie!” Seabaugh thundered. “You’re asking us to stick it to our constituents! It’s bad policy, and it’s bad re-election strategy!”
He also voted against the sales tax renewal as well, which the State House Republican leadership supported as a means to protect the TOPS program. Leger replied to Seabaugh, as HB8 went to a vote. “We work very hard from this well not to call people names, act with dignity and respect. I have to say, Gov. Edwards is not a liar… We each came here to positively impact people’s lives. This is one of those moments. Let’s solve the problems before us to the extent that we can.”
That swayed some Black Caucus members, though, not all. Baton Rouge Democrat Ted James told the House, “I support the bill. I despise the amendment. I despise the spirit of the amendment. That amendment is hateful. But it’s not enough for me to ignore the needs of the people of my district, or the needs of the people of this great state.”
That was not enough for his fellow Black Caucus member from Baton Rouge, Rep. Denise Marcelle, “I oppose this bill because of the amendment. The person who put the amendment on the bill put it there to kill the bill,” she declared all but pointing at Seabaugh.
And, some of his fellow Republicans were nearly as critical of their Shreveport colleague. GOP members Barry Ivey of Central, Bob Shadoin of Ruston, and Steve Carter of Baton Rouge pleaded with the House to pass Leger’s legislation. Perhaps the most articulate was recent breast cancer survivor Kenner Republican Julie Stokes who begged, “I’ve never seen us at a bigger crossroads. This is it – this minute. Let’s come together and heal this.”
The Governor worked both the GOP and Democratic caucuses to no avail.
The Regular Session starts March 12, 2018. Since passage of new taxes is constitutionally prohibited, the only remaining opportunity to enact new revenues is a brief window of days after its conclusion, and any budget for the coming fiscal year must be passed not knowing if there will be money to fill the gap.
This article originally published in the March 12, 2018 print edition of The Louisiana Weekly newspaper.
*Correction: It was Rep. Steve Carter of Baton Rouge who pleaded for the passage of HB 8, and not Rep. Gary Carter of New Orleans, as it was previously written in this story.
