"Governor's Tax Dilemma: Special Interests vs. Revenue Growth"

Interest Group Battles

Film producers, developers of historic properties, oil and gas industries, and local governments are among the key interest groups fighting to keep their tax breaks. As the Senate Revenue & Fiscal Affairs Committee prepares to reveal a plan to offset revenue losses from tax cuts, the details are still being worked on. One idea under consideration is to hike the state sales tax, despite Louisiana already having one of the highest combined sales tax rates in the country.

Lobbyists filled the committee hearing room, and senators are facing a difficult task of balancing the interests of different groups. As Sen. Jay Luneau pointed out, everyone seems to be hiding behind their own "tree," referring to the old adage of legislators trying to avoid being taxed. Governor Landry, emerging from the office of Senate President Cameron Henry, compared the process of making laws to making Cajun sausage, noting that it's not always a pretty process but hoping for a good outcome.

Tax Plan Challenges

Steven Sheffrin, a Tulane economist, believes Landry is on the right track by trying to repeal many tax exemptions. The current hodgepodge tax system creates uncertainty and confusion for businesses. However, film producers and developers of historic property don't want to lose tax credits that provide a low return on investment. Oil and gas interests also have concerns, such as the inventory tax credit and the provision that allows certain companies to avoid a big reduction in corporate income taxes.

Local government officials fear that Landry's proposal to give them the option to repeal the business inventory tax could lead to budget shortfalls. To address this, Landry and the revenue secretary have offered a one-time payment, but it may not be enough for some parishes. One way to get local governments on board could be to remove the requirement for them to stop imposing a sales tax on prescription drugs, which would simplify the tax code and benefit seniors.

Tax Rate Implications

Raising the sales tax would increase the "regressivity" of Louisiana's overall tax system, hitting lower-income households harder. It would also likely cause heartburn for Democrats as the plan already benefits the wealthy. For example, a household earning $50,000 to $60,000 would get a $301 tax cut, while a household earning $500,000 to $600,000 would receive a $5,181 tax reduction.

Landry is also facing difficulties in raising the intended $500 million per year through taxes on 41 different services. The House's vote to reduce an expiring sales tax has added to the complexity of the situation. Louisiana already has the nation's highest combined sales tax rate, and under the current plan, it could become even higher.