BATON ROUGE, La. (AP) — When Louisiana lawmakers passed a 0.45% sales tax in 2018 to stabilize state finances, they pledged the tax hike would be temporary, a bridge to balance the budget while lawmakers gained time to work on a larger tax overhaul. Three years later, Republican state Senate leaders instead are proposing to keep the tax on the books permanently and steer the dollars to road and bridge work.
Critics are crying foul, saying the proposal being pushed in the waning days of the legislative session would renege on a promise made to Louisiana residents in the hard-fought tax deal struck last term that boosted state sales tax rates to 4.45%. Backers of making the sales tax permanent cite the state’s $15 billion backlog of transportation projects.
The debate is expected to be hashed out this week in the Senate Finance Committee. The nine-week legislative session must end by June 10.
Port Allen Republican Sen. Rick Ward said the steering of nearly $400 million annually in sales tax money to finance road and bridge work, instead of letting the temporary sales tax roll off in mid-2025, would allow the state “to do something transformative for our infrastructure.”
“This is our one shot to right the ship,” he said.
Ward — with the support of Republican Senate President Page Cortez — attached the sales tax renewal language to a separate House-approved bill nearing final passage that sought to levy a tax on raw, smokable cannabis if Louisiana’s medical marijuana program is expanded to allow its use. Senators voted 27-10 to add the sales tax renewal.
Opponents said while they agree Louisiana needs to spend more on transportation improvements, they disagreed with extending a temporary sales tax to come up with the cash.
“We promised people it would roll off,” said Sen. Karen Carter Peterson, a New Orleans Democrat.
Sen. Joe Bouie, also a New Orleans Democrat, noted sales taxes hit the poor harder than other consumers, because they take a larger share of poor people’s income when they pay the tax. And Louisiana already has the second-highest combined average state and local sales tax rate in the nation at 9.52%, falling behind only Tennessee, according to the Washington, D.C.-based Tax Foundation.
Ward said Louisiana can’t afford to “push the ball down the road and wait for some other possibility to come along to fund our infrastructure.”
But the idea comes as Louisiana is receiving billions of dollars in federal coronavirus aid that can be spent on roadwork and as another debate is ongoing in Washington about sending more infrastructure money to states.
Ward’s amendments to the medical marijuana tax bill would phase out a temporary sales tax levied on business utilities by 2031, returning a tax break sought by industry groups but six years after the original planned removal of the tax. And it would strip the expiration date for the temporary 0.45% sales tax and shift the dollars generated by that tax to road and bridge construction over a three-year phase-in period starting in mid-2022. A specific set of transportation projects would be prioritized for the spending.
It’s not clear how lawmakers propose to fill budget gaps that could be caused if they strip away the sales tax dollars from general operating expenses earlier than expected.
After rewriting the tax bill, the Senate sent the measure to the Senate Finance Committee for a full hearing. Republicans and Democrats split in their first vote on whether to make the sales tax permanent, with bipartisan Senate support for keeping the tax on the books and bipartisan opposition.
The Louisiana chapter of the conservative organization Americans for Prosperity is running ads against the sales tax extension and intends to run ads and mailers criticizing those who support making the tax permanent, said the group’s state director James Lee.
“This is bad policy and bad politics, and legislators who wish to build trust with voters should reject it,” Lee said in a statement.
The idea also faces opposition from the head of the Republican Party of Louisiana, Louis Gurvich.
The bill is filed as House Bill 514.
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