Other shoe may drop on LA unconstitutional taxation
Before Louisiana policy-makers breathe a sigh of relief over the state’s current fiscal year budget, they need to realize the real trouble could lie ahead, either financially or as a threat to representative democracy in the state.
Last week, state District Court Judge Michael Caldwell ruled against the Louisiana Chemical Association in its suit against the state for the outcome of HCR 8 of 2015. That resolution suspended a penny of the four cent sales tax exemption on business utilities essentially for the fiscal year, which will raise an estimated over $100 million and allowed the budget passed to balance.
Caldwell noted, as has this space, that the Constitution allows for suspension of tax breaks from the time passed until 60 days after the end of the next year’s regular legislative session by a simple majority, the same required to put a tax exception in place. The LCA had claimed something like this did not need a two-thirds majority in each chamber through a convoluted argument that the supermajority provision applied only if the Legislature had suspended the entire statute that set up the tax, not a “portion” of it.
Even excising out this amount, while a relatively small portion of the overall general fund monies used, would cause big problems because financial projections for this fiscal year made by the state now seem overly optimistic. Besides unexpected higher expenditures in Medicaid and for the Taylor Opportunity Program for Students, severance tax revenues continue to underperform as oil and gas prices remain stubbornly low, and other taxes’ collections also may miss the mark. It seems as if the state will need every buck it can find.
Which, for policy-makers, creates an even more nightmarish lawsuit scenario: a suit like the LCA’s except addressing two bills that repealed tax breaks that did not get two-thirds majorities in both chambers; one, Act 123, that lopped off partially tax credits for income and franchise taxes; and one, Act 125, that eliminated certain lucrative exclusions and deductions. Together, they promised around $150 million more in revenues, lasting three years.
While lawmakers try to justify going around the Constitution in arguing these have a finite period of nonexistence, these statutory changes do not qualify as temporary, which the Constitution addresses as a suspension which only can last at most nearly 18 months. As statute, they repealed exceptions even if restored automatically at some point in the future.
Oddly, the LCA nor anybody else with standing has challenged these laws, where they seem incontrovertibly at odds with what the Constitution says on the matter of majorities required for a repeal. If found unconstitutional any time before the Apr. 15 corporate tax deadline, not only would this punch a hole in the current fiscal year but also for the next two years, with expected spending for next year already topping forecast revenues in the neighborhood of $1.5 billion.
And such a suit could end up as part of political calculations. By tossing it out there after Gov.-elect John Bel Edwards, who voted for both of these as a state representative, this could create more chaotic budgeting conditions, not just because of the scrambling needed for even more money over an even longer time period, but also because the Legislature could again try the same trick this year in not having the required supermajorities to repeal exceptions and a successful challenge removes that ability to skirt the rules.
That would make that much harder the raising of taxes without cutting the size of government and certainly would sabotage Edwards’ ideas to expand government. Additionally, this outcome would make all the more visible Edwards’ tax-and-spend ideology, reducing his ability to pose as a fiscal conservative needed if he has any ambitions to serve a second term.
Beyond political machinations, it simply insults the people to have policy-makers blatantly ignore the Constitution in this fashion. Rules in a democracy must be followed or else democracy doesn’t exist. Let’s hope in the rush to prop up big government democracy in Louisiana does not fail.
Posted by Jeff Sadow at 12:05