LA poised to endure sales tax reimposition

Get ready for a wild and wacky weekend at Louisiana’s Capitol.

Whether, and by how much and when, sales tax hikes will reinstitute in the state starting Jul. 1 the Legislature largely will decide over the next few days. Additionally, the budget finally accepted by Democrat Gov. John Bel Edwards may find itself rearranged to some degree. And, a wild card courtesy of the U.S. Supreme Court entered the equation.

In one corner, Edwards and his legislative party wants passage of a half-cent increase in sales taxes to replace the one cent rolling off Jun. 30. This represents a small bit of compromise from their initial preference of raising income taxes permanently, with them already having secured a temporary increase of some and an expanded earned income tax credit also due to sunset.

In the other corner, most Republicans, mainly in the House of Representatives, have signaled they will back one of three measures: a one-third cent increase, a two-fifth cent increase, or a half cent that decreases over time, all for five years duration only. Any of these positions reside considerably from their initial reluctance to raise any taxes at all.

To strengthen their hands, House Republican leaders have sent out a supplemental appropriations bill that rejiggers what cuts from the present baseline would have to occur. By setting some priorities where presumably more important items receive funding for anything less than the half-cent, this makes getting anything less more palatable. Whether the Senate, more controlled by Edwards, will accede is another matter.

Mixing things up more, today the Supreme Court issued a ruling allowing states to collect sales taxes on remote purchases even from dealers without a physical connection in a state. This will give a shot in the arm to state coffers that bolsters the argument for less than a half cent or even no increase at all. Louisiana already put a mechanism in place to implement this quickly.

Unfortunately, politics may point to an increase, and, interestingly, towards the GOP option that at least begins the highest. Over the span of the envisioned five years, the half-cent-diminishing one actually in aggregate taxes calls for a lower percentage than five straight years at two-fifths, although it still comes out greater than the one-third option.

Given that the Legislative Black Caucus comprises almost a third of House membership and enough other Democrats would join it – never mind Republicans dead set against any tax increase – in opposing anything but the half-cent renewal, they can prevent the two-thirds majority needed to pass a tax hike. By contrast, the half-cent deal in the previous special session attracted a number of Republican votes but fell in total a half-dozen short from success. Watering it down through diminution could pick off enough of them while Black Caucus defections may not even occur – after all, that bargain would allow maximal revenue-raising through the end of Edwards’ term, which its members want.

So, Republican maneuverings have set things up for some trimming of government but not outright rejection of any tax hike. Even with the joker of a high court ruling that could moot any need for a tax increase – if not argue for a decrease – the next few days should see Louisianans continue to pay higher sales levies than they did three years ago.