Portion of state deficit plugged, income tax hike fails

By Christopher Tidmore
Contributing Writer

Last week, the La. House of Representatives’ Ways & Means Committee rejected Gov. John Bel Edwards’ attempts to plug the $600 million deficit through reducing deductions within Louisiana’s Personal income tax. The measure is effectively dead for the session, leading some insiders to wonder would the Governor reverse course and accept a sales tax hike to restore hospital and TOPS funding?

The Governor did convince the House to approve a tax package worth around $220 million late last Thursday, June 9, 2016, yet that is still barely over a third of what Edwards seeks. Roughly $190 million of that amount comes from a new tax on health maintenance organizations or HMOs. Essentially, House Bill 35 establishes a $550 levy on every $10,000 of HMO premiums.

The bill’s author, Rep. Walt Leger III of New Orleans, managed to maneuver the measure between Democrats who had ruled out further consumption taxes and Republicans who have the same opinion of income taxes. The Bill is expected to have a favorable reception in the State Senate.

Leger’s openness to a form of the dreaded “sales tax” enjoyed far more success than an Administration effort to enact a new income tax hike last week. Democratic State Rep. Neil Abramson cast the deciding vote last Tuesday to kill House Bill 11, the Governor’s proposed reduction in itemized deductions—removing $116 million of the $600 million that Edwards says is needed to prevent devastating cuts to the Taylor Opportunity Program for Students scholarships, safety net hospitals, prisons, K-12 schools, and the state’s colleges and universities.

Abramson chairs the Ways & Means Committee in the lower chamber, from which all tax bills must emerge. The Uptown Democrat defended his vote, forcing House Bill 11 to fail, as he worried the measure could raise taxes on low- and middle-income taxpayers. HB11 would have reduced the itemized deductions individuals take on their federal tax returns that are in excess of the federal standard deduction from 57.5 percent of the deduction, instead of 100 percent today. Effectively, it would have restored a key part of the repealed Stelly Plan’s income tax increases.

Gov. Edwards defended the 57.5 percent rate, arguing it would continue to allow taxpayers to deduct their charitable contributions and mortgage interest payments. Popular deductions eliminated would be gambling losses, health expenses, and unreimbursed business expenses. Abramson joined GOP members who argued that their constituents “paid enough in taxes” and rejected HB11 in a 10-9 vote.

A broader plan by Rep. Barry Ivey, R-Central, and Rep. Julie Stokes, R-Kenner to eliminate individual income tax breaks in exchange for lowering the tax rate remains alive, but it is a revenue- neutral proposal, and would do little to plug the deficit.

This article originally published in the June 13, 2016 print edition of The Louisiana Weekly newspaper.