State House facing tax cut puzzle

Louisiana lawmakers face a political puzzle in a proposal to eliminate the state income tax.

Theoretically, the idea would appeal to many voters: a gradual phase-out of income taxes until 2017, when they would disappear entirely. In an increasingly conservative Legislature, with many freshmen who ran on anti-tax platforms, voting “yes” has its merits.

But eliminating income taxes would cost Louisiana one-third of its current annual revenue, forcing either enormous cuts in government services or creation of new taxes. States that have no income tax, such as Florida and Texas, tax property.

Some lawmakers say idea is an overly ambitious policy overhaul that hasn’t been properly considered.

“For political purposes, to just phase out taxes, is in my view being a lazy Legislature,” said Rep. Joel Robideaux, I-Lafayette. He is a member of the House Ways and Means Committee which handles all tax bills and could vote on the issue as early as Tuesday.

The panel’s vice chair, Rep. Jane Smith, said her goal for the moment is to keep the bill alive, in hopes of eventually passing some form of tax relief at a time of budget surpluses – which stem partly from high oil and gas prices but also from income taxes on individuals and businesses.

“We have an opportunity to give some money back to the people, while we sit here awash in money,” said Smith, R-Bossier City.

The original bill, by Sen. Buddy Shaw, was far more modest.

The Shreveport Republican campaigned on a platform to reverse tax changes imposed in 2002 – part of the so-called “Stelly Tax Plan” that increased taxes for every person earning more than $12,500 a year. Shaw said complaints about higher tax bills were what voters talked about most while he campaigned for office last year.

Shaw’s original bill would have taxed income between $12,500 and $50,000 at 4 percent, rather than the current 6 percent, creating a $750 break for someone with a $50,000 salary.

The Jindal administration opposed the bill in that form because it would have cut $302 million in revenues – and that wasn’t in administration budget plans.

Shaw got the bill to the Senate floor anyway but ran into a new problem: Sen. Nick Gautreaux, who persuaded senators to approve an amendment to phase out all income taxes.

Now the bill is a hugely expensive proposal for state government – a projected $4 billion drop in revenue for 2017 – and could draw a Jindal veto if it gets through the House.

Smith said she wants to strip off Gautreaux’s amendment and turn the measure back into the Stelly revision bill that Shaw first supported.

By keeping the Gautreaux amendment and provoking a likely veto, lawmakers would risk a scenario of political masochism: failing to deliver a tax break after talking about it for weeks.

The Jindal administration has been silent on the Gautreaux amendment.

Shaw, meanwhile, says the governor’s staff pushed for the amendment. Because Gautreaux’s tax phase-out would be so expensive, Shaw says, Jindal would have a reasonable explanation for vetoing it.

Rep. Hunter Greene, the Ways and Means chairman, said he’s not so sure an income-tax phase-out is unreasonable or too expensive. Eliminating income taxes, he said, “would put a gun to the head of the Legislature and the administration” and force them to slash government spending.

Shaw said he just wants his original bill back. In its original, $302 million form, Shaw said, it would give the governor – a fellow Republican – a good chance to act on his fiscal conservative philosophy.

“If he wants to reduce government,” Shaw said, “then this is the perfect way to do it.”