Senators back inventory tax repeal in budget-balancing plan

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BATON ROUGE — Ignoring the outcry of local government leaders, senators moved ahead Wednesday with the cornerstone of a budget-balancing package of tax changes under negotiation by legislative leaders.

The Senate Finance Committee voted 9-1 for a proposal by Sen. Robert Adley, R-Benton, to repeal the local property tax charged on inventory. The maneuver would save the state more than $500 million a year that it gives businesses in tax credits to offset the expense.

Business organizations support the tax repeal. But local school boards, sheriffs and municipalities that rely on the property tax money say the repeal could force them to shutter services or raise taxes on residents to fill the gap created by the lost revenue.

Senators on the committee and Adley insisted they would find ways to help offset the lost revenue — and they added to the bill language requiring it. But they said they needed to advance the proposal to keep negotiations moving with the House on solutions for closing a $1.6 billion budget shortfall in the fiscal year that begins July 1.

“We need to start moving some bills,” Adley said.

The House Ways and Means Committee wouldn’t agree to take politically-tough votes on proposals to raise the cigarette tax or scale back tax break programs until the Senate advanced the inventory tax repeal, a similarly difficult vote. Ways and Means Chairman Joel Robideaux, R-Lafayette, set hearings next week on the tax proposals after the Finance Committee vote.

The lone vote against the inventory tax repeal came from Sen. Ed Murray, D-New Orleans, who questioned if the state could protect local governments from devastating revenue losses.

The issue of upsetting local government leaders in an election year and threatening a tax source that provides hundreds of millions of dollars to police, firefighters and public schools worried many of the committee members.

“We cannot afford to lose 42 percent of our revenue in a small parish like ours,” said St. John the Baptist Parish President Natalie Robottom.

Sen. Greg Tarver, D-Shreveport, questioned how the state would be able to come up with dollars to help local government backfill the lost property tax revenue while also still generating new dollars for the state budget.

“We don’t have enough money to fund schools and hospitals in this state. Where are we going to find the money to do this?” he said.

Lawmakers are trying to stay within guidelines set by Gov. Bobby Jindal about what sorts of tax changes he’ll consider. The governor won’t support anything that he considers a net increase in taxes.

By getting rid of the inventory tax, Robideaux said lawmakers could raise other taxes to drum up cash while also saving money by not paying for the tax credit. He said the state could share revenue increases with local governments or allow them to raise their own new taxes.

But he acknowledged: “Whatever the plan is out there, it’s still on very shaky ground.”

That uncertainty was why local government officials filled the Senate committee room Wednesday in opposition to Adley’s bill.

St. Martin Parish President Guy Cormier blamed the governor and lawmakers for causing the state’s budget problem, and he said he didn’t know why local government was on the chopping block to fix it.

“We find ourselves kind of caught in a situation that we didn’t cause,” he said. “We didn’t cause this. This was caused by state government.”

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