Analysis: Lawmakers start looking at tax proposals this week

BATON ROUGE – As they look for ways to solve next year’s budget problems, Louisiana lawmakers are getting a crash course in the state’s tax system: the loopholes they’ve created, the tax cuts they’ve given and the price tag for the myriad of tax breaks they’ve approved.

Now, Democrats and Republicans worried about deep reductions to health care and colleges are wondering if they’ve been too generous, and that has become the central theme of this year’s legislative session as lawmakers start sifting through tax rewrite options in Senate and House committees Monday and Tuesday.

Legislative economist Greg Albrecht gave the Senate Finance Committee a detailed presentation last week, walking senators through the various tax breaks and cuts that have been passed over the last decade.

Carrying one of the biggest price tags, Albrecht said Louisiana lost $800 million in yearly revenue from income tax cuts passed to undo the Stelly Plan, a 2002 tax rewrite that eliminated sales taxes on groceries and residential utilities in exchange for increased income taxes on middle — and upper-income earners. The tax increases were rolled back in 2007 and 2008 after public backlash, and the sales taxes were never put back in place by lawmakers.

“We have permanently reduced our tax base in two areas, sales and income taxes,” Albrecht told senators.

And that doesn’t count other tax breaks that lawmakers passed or expanded or that unexpectedly grew much larger than anticipated after they were on the books. The cost for the state’s various tax credits, rebates and exemptions has ballooned by more than $600 million in the last five years alone, according to the Department of Revenue.

Albrecht’s presentation essentially showed senators how the Legislature helped create some of the state’s budget shortfalls. Lawmakers and governors stripped sizable amounts of money from the state treasury, and the problem deepened when the national recession hit.

Gov. Bobby Jindal and lawmakers refused to shrink state expenses to match state revenue, instead using patchwork financing to piece together budgets each year. Now, next year’s shortfall has ballooned to $1.6 billion for the fiscal year that begins July 1.

And everyone’s scrambling to find money.

Republicans who traditionally have defended business tax breaks have started describing the credits, rebates and exemptions as “government expenses,” a distinction that allows them to frame possible changes not as tax hikes, but as cuts to state spending.

Even Jindal, who has rigidly guarded his anti-tax reputation as he considers a likely presidential campaign, has targeted a set of tax breaks for scale-back in his budget recommendations.

He’s describing those tax credits, in which businesses get checks from the state treasury above their state tax liability, as “corporate welfare” and “excessive spending” to justify his proposal to lessen $500 million in tax breaks while also saying he’s not proposing a tax hike.

“To me that’s expenditures. That’s government spending. And that should be on the table. It would be wrong to protect that spending and then make deeper cuts to higher education,” Jindal said Thursday.

He added: “I do make a distinction.”

Meanwhile, Jindal’s revenue secretary, Tim Barfield, has been circulating data that shows many of Louisiana’s biggest companies aren’t paying income taxes to the state at all.

Barfield said he found companies aggressively using tax avoidance options and tax breaks to avoid owing anything to Louisiana.

Of the 87 largest companies that filed corporate tax returns in 2012, one-quarter of them, 22 businesses, paid corporate income taxes in Louisiana, according to the revenue department data. About half of the businesses, 42, paid corporate franchise taxes.

The department had similar findings from the 2011 returns.

Barfield’s talking to lawmakers about possibly closing some of the loopholes, and several bills are proposed in the 60-day legislative session to do that.

The discussions are far different from seven or eight years ago when lawmakers were proposing new ways to cut taxes and add tax break programs, or even two years ago when legislators were resistant to ratcheting back existing tax breaks.

Budget desperation has changed the conversation this legislative session.