A Louisana Budget Project: A Second Penny Would Be a Bridge Too Far

Who-Pays-One-pennyI share this statement, issued Saturday by the Louisiana Budget Project, in its entirety because I agree with every word. -Bob Mann

A Second Penny Would Be a Bridge Too Far

Times of crisis call for shared sacrifice. But the deal being offered by big business interests to solve Louisiana’s historic budget shortfall would violate that basic principle by putting too much of the burden on working families that can least absorb a tax increase.

With Louisiana facing a $900 million budget gap that threatens critical health and education programs, a temporary one-penny increase to the state sales tax is a reasonable solution – as long as it’s part of a broader framework of revenue increases and prudent budget cuts. Even so, raising the state sales tax from 4 percent to 5 percent would make Louisiana’s combined (state & local) sales tax rate the highest in the country, according to the Tax Foundation.

Louisiana’s high sales taxes are the major reason why families in the bottom 60 percent of income earners pay state and local taxes at twice the rate of the richest 1 percent as a proportion of total income. Raising the current tax by a penny will cost an average middle-income family in Louisiana $319 per year.

Published reports say that business interests are now pushing to add a second penny of sales tax. Let’s be clear: Picking this option means choosing to side with large, multinational companies over the working families of Louisiana.

Raising the money necessary to avoid devastating cuts in the current-year budget isn’t easy. But the second penny of sales tax wouldn’t be necessary if the business community – and the wealthiest taxpayers – were to share in the sacrifice. For example:

Temporarily suspending the payment of inventory and motion picture tax credits. Last year the Legislature put a $180 million cap on film credits, but the state currently is $46 million under the cap.

Removing the sales-tax exemption on business utilities would raise an estimated $60 million between April 1 and June 30 – and bring in $240 million to help address next year’s shortfall.

Beyond that, the Legislature should look to the beer, liquor and tobacco industries for additional revenues. Cigarette taxes have broad public support, yet the 22-cent per pack increase that passed the Legislature would still leave Louisiana 53 cents below the national average. Louisiana’s beer tax has not been raised since 1948 and is lower than in many Southern states.

Finally, legislators should remember that Louisiana is already a low-tax state for business. And that those businesses, just like families, are dependent on good roads, quality schools and safe communities that our tax dollars help support. But by proposing to add yet another penny to Louisiana’s sales tax, the business community has shown that it’s not willing to share in the sacrifice that’s needed to bring Louisiana out of this historic abyss.

The Baton Rouge-based Louisiana Budget Project provides independent research and analysis of Louisiana fiscal issues and their impact on low and moderate income residents.

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6 Responses to A Louisana Budget Project: A Second Penny Would Be a Bridge Too Far

  1. June Butler says:

    Bob, I agree. Another penny tax piled on the backs of those who can least afford it is a shameful proposal to close the gap. Why no increase the liquor tax and the other revenue sources you mention? That the legislators cave in to business lobbyists so easily shows just how beholden they are to their benefactors and what little sense of fairness they have for the citizens they were elected to serve. And the business lobby won’t give an inch.

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  2. Fredster says:

    I just read an article on nola.com by Julia O’Donoghue which stated that the Repubs in the House will need the Dems to go along with the extra penny for it to pass. I don’t really see that happening.

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  3. gjrushing says:

    Its’ s an insult to everyone in Louisiana that elected official thinks we should raise the sales tax another cent rather than raise the liquor tax. Do they think we are as stupid as they are? There is no justification for doing this. As for film tax credits, this is an industry that actually creates good paying jobs in this state and supports lot of small businesses that have carved out a nich for themelves using theri own investments. Leave it alone, we recently changed it and it has already hurt the industry. Raising the liquor tax will not cost the state 1 job. It is almost the goos that laid the golden egg if used properly. No one will stop drinking over a liquor tax. They will raise the cigarette tax which lowers the folks who smoke (good thing) but that in turn reduces the revenue from the tax. Im willing to bet that raising the alcohol tax will raise a lot of revenue and cost no one theiri job. Yet thy turn that tax down and excpect us to pay a 2 cent increase in a sales tax? Hve we nothing but spineless idiots in Baton Rouge?

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  4. OneStateWorker says:

    “Finally, legislators should remember that Louisiana is already a low-tax state for business.” More importantly, remember that Louisiana is a low tax state for business because jindal CUT THEIR TAXES more than 70%. Just restoring taxes on the wealthy and businesses to pre-Jindal rates, and completely eliminate ALL corporate welfare, would probably completely cure our budget ills.

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  5. cpelder says:

    Wait until the legislature faces the wrath of the people for letting the state go under! Hell hath no fury like an unhappy population! And, it should be remembered, that the state legislature of that time, along with Bobby J. and his craziness,
    are the reasons we are in the situation we are in.

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