While there has been some chatter about a potential special session focused on taxes, the heads of the Legislature’s tax writing committees don’t think it’s a ripe conversation just yet.
Of course, it’s Gov. Jeff Landry’s decision whether to call a special session. And the governor and legislative leaders are united in wanting to further slash personal income tax rates, preferably all the way down to zero.
But every half-point cut to the rate costs the state a half-billion dollars in revenue, which makes eliminating the personal income tax a $3 billion dollar math problem, so legislative leaders are treading cautiously. While the recent tax overhaul was meant to be pretty much revenue neutral, next month’s Revenue Estimating Conference meeting will provide more clarity about whether it’s actually working out that way.
“Right now, we’re still in the process of bringing in our income tax from last year,” Ways and Means Chair Tony Bacala said, when asked if he thought that a tax special session was a good idea. “We can’t judge where we’re at until we see where we’re at.”
His committee has taken up bills this year that would ramp down the income tax rate over time, rather than all at once, but that approach doesn’t solve his issue.
“We just need to have an evaluation before we start making any adjustments, even if they’re future adjustments,” Bacala said.
That same uncertainty is why Senate Revenue and Fiscal Affairs Chair Franklin Foil says it makes sense to wait until next year’s regular fiscal session before considering more tax cuts, rather than holding a special session on a shorter timeline. He was a freshman in the House when members repealed the Stelly plan while the Hurricane Katrina recovery was artificially inflating state finances, and he remembers well the shortfalls that followed.
“We really didn’t wait to see how things panned out after Katrina to see if those surpluses were sustainable,” he says. “It turned out they weren’t.”
Since next year is a state election year, there will be a lot of political pressure to vote to get rid of the income tax, even if it has to be a gradual phaseout, Foil says.
“It would be politically easy for us to come in and say, ‘Hey, we’ll phase it out over time,’ and then let the next group that comes in figure it out,’” he says.
As for other things that could be on the agenda for next year’s fiscal session, he mentions that many members also would like to reduce sales tax rates. Cutting sales and income taxes at the same time would be a challenge to say the least, but members are tired of Louisiana being known for having the highest combined state and local tax sales tax rates.
While it’s not a fiscal issue, Foil notes that national tax organizations mark the state down for not having centralized sales tax collection. But local officials are not comfortable with having the state collect their taxes, which has so far made that change a no-go politically.
Foil would love to see the state’s inventory tax go away, so he’s very interested to see what happens with Amendment 4 on next month’s ballot, which gives parishes the option to stop charging the tax. Parishes that repeal the tax could get up to $15 million from state coffers as an incentive.
“I know that all of us have an ultimate goal of reducing or eliminating the income tax,” Speaker Pro Tempore Mike Johnson said, but added that he was not aware of any current plans to call a special session.
