A struggle is brewing over whether the dollars raised by eliminating a credit or exemption should be used to plug budget holes or to create new tax breaks.
Some lawmakers see an opportunity to offset cuts in a state that has been hit with repeated rounds of budget slashing and that faces a $963 million budget shortfall next year. Gov. Bobby Jindal and other lawmakers disagree, saying new tax incentives can help boost the economy.
Sen. Francis Thompson, D-Delhi, said the tax break review could help shrink the budget gap by eliminating “some credit or some rebate or something that’s not in line with our philosophy.”
“Certainly we wouldn’t want to give a bad deal for rich people and take away something for those that are poor or in need,” Thompson said.
Rep. Joel Robideaux, R-Lafayette, is chairman of the House tax committee and of the tax break study panel scrutinizing Louisiana’s more than 460 tax breaks. He said it’s too soon to talk about eliminating tax breaks to generate new dollars for state spending.
“I’m not convinced that our budget is done in a way that maximizes all the money that we do have available,” he said.
Jindal, who has said he will make a restructuring of the state’s tax code his top priority for the next legislative session, has come down firmly against any removal of a tax break to drum up money for the budget.
The Republican governor says any revamp of taxes on individuals and businesses should be “revenue neutral,” meaning that if state officials decide a tax break no longer makes sense and should be eliminated, the savings would then be used to pay for the cost of lowering taxes somewhere else.
“This is not an exercise to simply raise revenue and grow government. We want to grow the private sector economy, not the government economy,” Jindal spokeswoman Shannon Bates said in a statement.
Jindal’s focus is to simplify Louisiana’s tax code, with an eye to attracting business and easing the complexities of tax filing for families and companies, said Tim Barfield, executive counsel for the Department of Revenue and the governor’s leader on the tax code revamp.
Barfield expects the Jindal administration to offer its proposals by mid-January.
Jindal will veto any measures that get rid of tax breaks to generate new dollars for the state’s budget, according to Bates. The governor calls that equivalent to a tax increase.
“Eliminating bad deals in tax incentives or whatever you want to call them, credits or reductions, is certainly not raising taxes. It is managing a budget and taking out parts that are not working,” he told the governor’s chief budget adviser at a recent hearing.
The issue crosses party lines.
Senate Finance Committee Chairman Jack Donahue, the Republican who pushed for a review of the state’s long list of tax breaks, said he wanted to scour the billions of dollars in credits, exemptions and rebates because of the state’s ongoing budget woes.
“I am interested in making sure Louisiana’s getting its fair share for what it’s giving,” said Donahue, R-Mandeville. “I’m hoping we can find some we can get rid of.”
He’s not discarding the possibility that trashing low-performing tax breaks could give the state more money for filling budget gaps. He said it’s too soon to decide the best way to handle any cash that could be generated.
Robideaux said the threat of the governor’s veto would make it difficult to pass any legislation that uses tax break removal to fill budget holes.
“That doesn’t mean it doesn’t have a chance of passing. But that’s a pretty big hurdle,” he said.
By MELINDA DESLATTE