Gov. Edwards’ budget ideas unveiled, so negotiations begin

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BATON ROUGE — Reaction to Gov. John Bel Edwards’ tax hike proposals for closing Louisiana’s massive budget holes was mixed Wednesday, with legislative leaders saying they’re encouraged by the broad array of options but others already showing resistance to the ideas.

“It is something for us to chew on, and that’s what I can appreciate. We now know exactly what the plan is, and we can discuss it from here forward to mitigate the problems that the state faces,” said Rep. Lance Harris, R-Alexandria, chairman of the House GOP delegation.

The Edwards administration estimates the new governor inherited a shortfall topping $700 million for the remaining five months of the $25 billion budget and a gap that reaches $1.9 billion for the next fiscal year that begins July 1.

Edwards plans to call a special legislative session beginning Feb. 14 to work on stabilizing the budget. The Democratic governor released a two-page “menu of options” Tuesday of taxes he’d be willing to support to raise new dollars for the treasury.

He said the state will need “shared sacrifice” to fix Louisiana’s systemic budget problems.

The list included a sales tax hike, increased tobacco and alcohol taxes, boosted taxes on phone service and car rentals, higher income taxes and decreased tax breaks for businesses, among other ideas.

“What I’m encouraged about is he is saying it’s not his way or the highway. He’s willing to take suggestions,” said Senate President John Alario, R-Westwego. “He’s saying: ‘If somebody has a better idea, let’s put it on the table.’ There’s no swim lanes to have to stay within.”

Edwards’ predecessor, Republican Bobby Jindal, wouldn’t support anything he considered a net tax increase, instead using short-term fixes like property sales and drained savings accounts to keep government operating.

Not everyone was pleased with Edwards’ options, particularly some conservative Republicans and business leaders.

“Pretty much everything on that list, we feel would be impactful to small businesses,” said Dawn Starns, state director of the National Federation of Independent Business. “Just a cursory look at these, we do not feel our members are going to be supportive of this.”

Rep. Paul Hollis, R-Covington, issued a statement saying he refuses “to back a budget that raises taxes on Louisiana families or businesses. Despite what some in Baton Rouge may think, we cannot tax our way out of this hole.”

Although he advocated cuts, Hollis didn’t offer ideas on where to slash spending.

State Republican Party Executive Director Jason Dore said he was surprised Edwards didn’t offer suggestions for cutting government next year.

“I think he’ll have a hard time to get Republican legislators on board when he’s not coming to the table with cuts. It’s all tax increases. It’s all from the spending side; no reforms,” Dore said.

Both Alario and House Speaker Taylor Barras said they expected lawmakers would want to cut government spending in addition to raising new revenue. But they said such decisions would be made as lawmakers see the first budget proposal from Edwards next month.

Edwards said he’ll present a 2016-17 budget that shows what cuts would be needed to close a $1.9 billion gap.

Barras, R-New Iberia, said he doesn’t know what mix of cuts and tax hikes the House will support.

“I think you inevitably have to talk about truly what does it take to operate our state and can we do that with a half-billion or a billion less dollars?” he said.

Gov. John Bel Edwards has released a “menu of options” for balancing the budget, revenue-raising ideas that could hit businesses and consumers with higher tax bills. Lawmakers will consider the proposals in a three-week special legislative session that Edwards says he’ll call for Feb. 14. It’s unclear how much each item would generate.

Included on the list are:

  • Increasing Louisiana’s state sales tax from 4 percent to 5 percent, with fewer exemptions allowed for the new tax.
  • Increasing the state telecommunications tax charged from 2 percent interstate and 3 percent intrastate to a flat 5 percent rate.
  • Increasing the state’s tobacco tax from 86 cents per pack of cigarettes to $1.08 per pack.
  • Increasing the state income tax for middle- and upper-income residents who itemize their tax deductions, by cutting the percentage of federal excess itemized deductions those taxpayers can deduct on state income tax forms.
  • Increasing taxes on alcohol.
  • Eliminating the state tax deduction for federal income taxes in exchange for lower individual and corporate tax rates.
  • Charging corporate franchise taxes on more businesses.
  • Enacting a state car rental tax.
  • Charging a state sales tax on hotel rooms booked through online travel companies.
  • Making permanent a recently-passed 28 percent across-the-board cut on many tax break programs and a 20 percent cut on certain business tax rebate programs. The reductions are due to expire on June 30, 2018.
  • Repealing the sales tax exemption for business utilities, requiring businesses to pay the 4 percent existing sales tax, but with provisions to lower the tax if natural gas prices rise.
  • Reducing the tax credit businesses can receive from the state for paying local property taxes on their inventory.
  • Reducing a tax credit that insurance companies receive for payment of insurance premium taxes.
  • Providing a method for collecting state sales tax from online retailers.
  • Reworking tax loopholes.

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