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addressing two bills that repealed tax breaks that did not get two-thirds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repealed exceptions even if restored automatically at some point in the future.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.
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