Structural Budget Reform

For the first time in nearly a decade, Louisiana has a balanced budget. This means that we have managed to pass a budget that is honest and doesn’t rely on smoke and mirrors to get our bills paid. We no longer use one-time money for recurring expenses and we have streamlined our spending to the point that we are even currently enjoying a $300 million surplus. In fact, this is the second year in a row that we have experienced a surplus!

Leger at desk

This is no small feat given the fact that we are still saddled with the mistakes and fiscal irresponsibility of our past and we have still failed to pass structural, long-term reform. We have experienced some 15 mid-year budget shortfalls over the last nine years because of this unwillingness to act, which is an extreme financial burden to the people of Louisiana. Two years ago, when we were faced with yet another daunting deficit, we added another temporary penny on the sales tax that brought in an additional $400 million in revenue to help close the gap, giving Louisiana one of the highest local and state sales taxes combined in the country and hitting low-income earners the hardest, taking up a higher percentage of their salaries and contributing to their struggles.

Because of that decision, we had a particularly harsh reality to face during the 2018 sessions: that additional penny was expiring and we were faced with a staggering $1.2 Billion fiscal cliff. When the Legislature initially passed the additional penny, we set an 18-month deadline on it and we were assured by the Speaker and the leaders of Appropriations and Ways and Means that we would tackle structural reform before the penny disappeared. However, even though myself and several of my colleagues introduced legislation doing just that, we weren’t even allowed a vote on most of it, much less a meaningful discussion.

Instead, we reduced the sales tax by .55 cents, extending only .45 cents of the additional penny. This will help the people of Louisiana move past poor decisions made by the previous Administration that have continuously destabilized revenue and the business climate of our state. However, this measure falls far short of the structural tax reform long needed in our State. In order to compromise, we had to include a sunset on the revenue generated, which will create another fiscal cliff in 2025.

I am confident that in the next seven years, we will be able to find a workable long-term solution that will not subject the people of Louisiana to this kind of instability every few years. We should be able to use the momentum from the surplus and make policy decisions based on what the citizens of Louisiana need, not what partisan politics dictate. This is exactly what I intend to do.

Drawing from the final report and recommendations of the bipartisan Task Force on Structural Changes in Budget and Tax Policy, I support legislation to do the following:

Fully or partially reinstate the Stelly Plan. From 2002 to 2009, Louisiana depended on personal state income taxes to help balance the budget. Under the Stelly Plan (named for Rep. Victor P. “Vic” Stelly of Lake Charles), an increase in the personal income tax rate was approved by voters as a tradeoff for lower sales taxes on food and utilities. After the Stelly Plan was repealed in 2009, income tax revenue dropped drastically, which was balanced out in the aftermath of Hurricanes Katrina and Rita when the state saw large amounts of incoming revenue for rebuilding. After that additional aid came to a halt, the budget crisis became an annual event, resulting in 15 mid-year deficits in the last 9 years.

Stop deducting Federal taxes on both business and personal state income tax forms. This lowers the amount of taxable income and reduces revenues for the state. Louisiana is one of only three states allowing this. This will not affect the personal income tax for most Louisiana taxpayers, as this deduction requires itemization and filing long form tax return –which isn’t used by many. An option is to remove the deduction for income taxes paid in exchange for lower individual and corporate tax rates.

Simplify our tax code. Our tax code is so overly complicated that we rank number 44 out of 50 by the Tax Foundation’s 2019 State Business Tax Climate Index. This isn’t just bad for business, it’s bad for Louisiana citizens. Not only will new industries continue to skip over Louisiana as a place to create new jobs, but we are missing out on revenues due to a convoluted tax code filled with loopholes and unnecessary deductions. All we have to do is simplify and reduce the income tax rates. Let’s modernize our tax code, improve our business climate, and invest in our state and our people.

Fix our revenue problem. Ours is not a problem of spending, but of revenue. The State General Fund-the part of the budget that is made up of revenue generated from state dollars and funds priorities like education and health and hospitals- is less than what it was in 2008. This means that in the last 9 years, we have spent less state taxpayer dollars and have failed to even maintain the level of services we enjoyed nearly a decade ago. We haven’t invested in growth and we certainly haven’t accounted for inflation or for other growing costs like healthcare and retirement benefits for state employees. In 2017, 129,000 out of the 149,000 corporations in this state paid no income taxes in Louisiana. We need to carefully inspect all the tax credits and tax exemptions these businesses currently enjoy, and determine if some should no longer apply.

Taking these important measures would introduce long-term structural reform to our fiscal policy, bring in more revenue and prevent more cuts to higher education and healthcare. I will keep fighting for our people and continue to find workable solutions to create fiscal reform.