Having a week ago defeated by the narrowest of margins a measure to remove deductibility of a good chunk of federal excess itemized deductions from state income taxes, the same House Ways and Means Committee forwarded by the narrowest margin a somewhat-similar bill yesterday. These differ in that the newest version, HB 38 by state Rep. Malinda White, after changes specifies full coverage of mortgage interest and charitable deductions, makes the lack of deductibility last only 24 months, and potentially could revere the increase if enough revenue in the $125 million range each year came from other sources and thereby would allow those filers otherwise limited by the bill to carry forward and claim the entire deduction at least two tax years down the road.
Both Chairman Democrat Neil Abramson and Vice Chairman Republican Jim Morris switched votes from the previous occasion, having formulated the compromise version from the original that began basically identical with the predecessor measure. GOP State Rep. Julie Stokes, always on the hunt to grow government as a price for her conception of tax simplification, switched from an affirmative vote on last week’s efforts because of the temporary nature of the tax.
The risk inherent in letting this bill out comes from the false hope that the smaller-government House leadership can keep it confined to the parameters they intend. Several big government Republicans like Stokes in the House may let their hungers for revenue to prop up spending lead them to voting to amend the bill on the floor to get rid of the amendments and send it along as a permanent increase. That committee Democrats expressed reservations with the amended bill and voted just to get it to the floor for wiping out the changes, and that a couple of other GOP members on the committee who also have shown an appetite for big government, state Reps. Chris Broadwater (who also has authored tax simplification legislation) and Stephen Dwight voted for the bill both times, makes this possibility a real threat.
Yet even if it becomes law in its present form, chicanery in revenue estimation could subvert the bill’s portion designed to make the hike inoperative if enough money from other places shows up in state coffers. In order for the panel that determines this, the Revenue Estimating Conference, to change a number from a previous forecast, it must have unanimity among its four members who draw data from, but who do not have to use the numbers computed from, estimates by the executive and legislative branches.
Seeing as one of the panelists, Commissioner of Administration Jay Dardenne, represents the revenue-hungry Democrat Gov. John Bel Edwards, the Administration over the next two years could hold out for estimates below the forecast level just low enough to prevent any refund to filers by having this veto power. Then when future estimates come in higher than forecasts, Dardenne can feign surprise. Because another roughly $1 billion or so of temporary taxes rolls off in about 24 months as well, as a buffer to discourage right-sizing government this cushion could tempt implementation of this fiction to the expense of taxpayers and economic growth.
The entire House is scheduled to consider this bill today. A leadership looking out for taxpayers and efficient and enlightened use of their funds plays with fire having this bill out, which has flaws as a matter of policy regardless of form because it needlessly removes monetary resources in the private sector most capable in deploying these for purposes of economic growth.
While as far as tax exceptions go this might not act the most effectively, until policy-makers conduct a comprehensive study of these to determine their relative values and their places relative to the genuine spending needs of the state, this credit deserves retention. As such, even with modifications, HB 38 merits sidelining when it comes up.