With tax deal, stable years ahead for Louisiana’s finances

Local News

Louisiana Gov. John Bel Edwards is poised this week to sign the state’s longest-term revenue fix in a decade.

The proposal to levy a 4.45 percent sales tax rate through June 30, 2025 won final passage Sunday in the Louisiana Legislature. Its seven-year window will offer state finances a security not seen since former Bobby Jindal’s administration, while keeping state health and higher education funds afloat.

“Now that the fiscal cliff is in the rearview mirror, prosperity and stability are straight ahead,” Gov. John Bel Edwards told reporters.

The legislation follows years of bandage fixes, after Jindal and previous Gov. Kathleen Blanco cut income tax hikes. Lawmakers halted some business tax breaks, while raising taxes on alcohol and cigarettes, seeking to close budget gaps without cuts. In 2016, legislators passed a two-year, one-cent sales tax, meant as a bridge to structural reforms that never materialized.

What followed was a frenzy of sessions — seven since 2016, including three in 2018 — as the temporary revenue neared its July 1 sunset. Until last week, lawmakers had spent the better part of two years divided. Republicans generally opposed taxes, while Democrats favored income taxes, claiming sales taxes hurt lower-income earners. But in the end, legislators chose the sales tax as their middle ground.

“I don’t want to be known as somebody in favor of taxes,” said Sen. Jack Donahue (R-Mandeville). “But I’ll be damned if I’m going to cut $100 million out of education, when I know that’s what we need in this state.”

“As a lawyer, when I engage in compromise, everybody walks away with their bottom lip poking way out, and nobody is happy,” Sen. Dan Claitor (R-Baton Rouge) said. “I see a lot of bottom lips poking way out, so it must be a pretty darn good compromise.”

“Nobody got everything they were looking for, but they got something,” Edwards said.

The governor joined lawmakers in hoping that the sales tax renewal will spark higher ratings from the nation’s credit agencies, following a stretch of lower grades.

“We are going to move forward in a way that should inspire confidence in people who want to invest in Louisiana,” he said.

Edwards and lawmakers have not closed themselves off to proposing structural tax changes in the coming years. Legislators will be able to consider revenue measures in the 2019 regular session, as it will be an odd-numbered year.

“If you don’t like raising taxes, file tax reform bills,” said Sen. J.P. Morrell (D-New Orleans), who chairs the Senate revenue committee.

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