NEW ORLEANS — Louisiana lawmakers spent their first full day of the special budget session, hearing a grim state financial forecast and sifting through various tax hike proposals.
The state is on pace to end the current fiscal year on June 30, with a nearly one billion dollar budget shortfall. The deficit is expected to grow to two billion dollars next year.
Rep. Julie Stokes, R-Metairie sits on the Ways and Means Committee, the House tax writing panel.
“The tax foundation has deemed us to have the lowest taxes in the United States,” Stokes said. “I think that it’s important to have an honest dialogue about how we got into this mess, no rhetoric an honest conversation.”
The big ticket item in the governor’s budget balancing act would raise the state’s 4-cent sales tax by another penny on every dollar spent. That could raise $907 million per year, $216 million this year if the tax kicks in April 1.
“We know that sales taxes are some of the most regressive taxes we have because people at the lower end of the economic spectrum tend to spend everything that they make, so an increase in the sale tax hits poorer families harder than it hits folks in the middle class and certainly the upper-income brackets,” Jan Moller, director of the Louisiana Budget Project.
Other proposals include raising the cigarette tax from 86 cents to one dollar and 8 cents per pack. That could raise $81 million a year, $17 million this year. A new internet sales tax could raise about $40 million a year. There will also be attempts to raise taxes on alcohol, phone service, online hotel bookings and short-term rentals.
“Judging from the public reaction from legislators, there’s still a lot of interest in finding ways to cut this budget, to minimize the amount they have to raise in taxes,” Moller said.
WWL-TV spoke with some taxpayers about the possibility of higher taxes.
“We have to do something right now, or else things are going to get worse than what it is,” Dwayne Fisher said. “I’m very worried, very worried about that.”
Others agreed that action needs to be taken.
“We are in the fiscal disaster area, right now,” Chantal Brousseau said. “If they don’t so anything about it, we will end up cutting some really essential services.”
“I’m willing to participate if I feel like it’s authentic, but I don’t know yet,” Gail Masy said. “I don’t know what all these proposals are, so I’d have to read more about them.”
Higher personal income taxes are also a possibility. There are proposals to adjust the current tax brackets and repeal the federal income tax deduction.
“That is very unique only three states allow the federal income tax deduction in full, the reason nobody allows it is because your linking your tax and revenue system to another system,” Stokes said. “That sets a dangerous precedent. If federal taxes go way up, then we’ve got a situation in Louisiana where we could be another $300 million to $400 million out of the budget, just like that.”
On the corporate side, lawmakers may increase the franchise tax, institute a flat tax and repeal the tax exemption on utilities.
Lawmakers have just three weeks to balance this year’s budget.