Jeff Landry focuses on sales tax increase

It’s simple math.
That was the explanation of state senators Tuesday when asked why they are considering an increase in the state sales tax rate – already the highest in the country.
It’s a proposal that would hit all consumers in the pocketbook, but especially the poor.
The idea emerged Monday because raising the state portion of the sales tax from 4.45 cents to 5 cents on every dollar would pay for the income tax cuts in Gov. Jeff Landry’s ambitious proposal to rewrite the state tax code. Louisiana’s combined local and state sales tax rate is currently 9.51%.
Members of the Senate Revenue & Fiscal Affairs Committee didn’t act Tuesday on raising the state sales tax, but they did approve dozens of changes, minor and major, to his plan on Day 14 of a 20-day special legislative session.
Special interests trying to protect their tax breaks had a mixed day.
The committee rebuffed the petrochemical industry, which wanted legislators to keep a tax break that benefits about 20 companies that move goods in and out of foreign trade zones at ports.
Sen. Jay Morris, R-West Monroe, made the motion to not allow the tax break, noting that Louisiana is the only state with it.
In other action, committee members voted to reduce the top corporate income tax rate from 7.5% to 6%. Landry wanted to establish a flat 3.5% rate.
They also took one vote to seemingly save the film and historic properties tax credits – Landry sought to eliminate them – by lowering how much the state can spend on each program. But committee members then approved another change that would eliminate the film tax credit program by preventing any taxpayer from cashing in enough credits to receive a tax rebate from the state.
Sen. Jay Luneau, D-Alexandria, who offered that change, said several hours later he would withdraw that idea because it conflicted with other amendments that the committee approved Tuesday. He had just passed along that news to five now-relieved representatives of the film industry.
Luneau’s reversal reflected the confusion of the Senate committee approving so many amendments without enough time to vet them.
The committee made one other major change to Landry’s proposal: The governor wanted to make prescription drugs no longer subject to local sales taxes, but committee members voted to keep that tax at the request of local governments who said losing it would cause them budget shortfalls.
The committee advanced two other key portions of Landry’s original plan.
House Bill 1 would replace the three-tier individual income system with a flat 3% rate and triple the standard deduction for individual filers.
House Bill 3 would repeal the corporate franchise tax, which is a tax on corporate assets.
The Senate is planning to take up Landry’s tax bills Thursday.
Senate President Cameron Henry, R-Metairie, said senators haven’t settled on the final sales tax and income tax rates and are also considering raising revenue by redirecting money from the vehicle sales tax away from infrastructure projects and to the state general fund.
“We’re still looking at a bunch of options,” Henry said in an interview after the Senate concluded its business Tuesday. He said he has spoken repeatedly with Landry over the preceding 24 hours.
Once the Senate has acted on the tax bills, the House would have to approve the Senate’s changes for the bills to be sent to Landry for his signature.
Here’s how math is compelling the actions of senators in the final week of the special session: The changes that Landry and Republicans want to make to the individual income tax system would cost the state treasury $1.3 billion per year.
Landry proposed to make up that revenue by renewing .45-cents of the 4.45-cent sales tax, eliminating sales tax breaks, extending local and state sales taxes to 41 additional services and eliminating tax credits – including for film producers and for developing historic property – that produce a low return for taxpayers.
But last Thursday, the House balked at extending the sales tax to such services as dog grooming, car washes and getting tattoos. That blew a $500 million hole in the revenue-raising portion of Landry’s plan.
Then senators agreed to cap the spending on the film and historic building tax credits rather than eliminate them. Currently, those programs cost up to $180 million and $125 million, respectively.
The Senate tax-writing committee would cap the film credit at $120 million per year and the historic buildings credit at $85 million per year.
Those moves would create an additional $200 million per year hole in Landry’s plan, or a total of $700 million by including the revenue loss from not taxing the services.
Raising the state sales tax from the current 4.45 cents per dollar to 5 cents per dollar would raise an additional $600 million per year, the Revenue Department says.

Sen. Franklin Foil, a Republican from Baton Rouge who chairs the Revenue & Fiscal Affairs Committee, said Republicans want to move to the lowest possible individual income tax rate, even if that means higher sales taxes.
“Around the South, the trend is to lower income taxes or go to no income tax,” Foil said in an interview following the committee hearing. “We’re doing what the other southern states around us are doing.”
Foil added that he would rather not have the highest sales tax rate in the country.
“But we’re already there,” he said. “If we went up slightly to make all of this work, if we can get the income tax down, the corporate income tax down, I would consider that a win.”
Republicans hold 28 seats in the Senate. It will take 26 votes to pass the tax measures Thursday.
It’s possible that some Republican senators can’t stomach the sales tax increase – six Republicans voted against a sales tax rate renewal in the House last week – so Landry may need some Democrats to support it.
Sen. Joe Bouie, D-New Orleans, said Democrats feel caught in a quandary. They don’t want to raise the sales tax but fear that not having that money would lead to cuts in government services that benefit their constituents.
Rep. Matthew Willard, D-New Orleans, said he would oppose the proposed sales tax increase.
“It would make the overall tax package more regressive,” Willard said, “because it would hit low income families harder and erode the potential savings from the income tax cuts.”