Good news on the homefront
April 28, 2015
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April 28, 2015
The Louisiana House of Representatives took its first step toward raising revenue to close a state budget gap that threatens to shutter public colleges and restrict health care services for the poor.
The House Ways and Means Committee advanced a cigarette tax hike (HB 119) Monday (April 27) that would raise the cost 32 cents per pack — to match the current overall tax rate in Mississippi of 68 cents per pack. The bill now heads to the full House of Representatives for a vote.
The additional cigarette tax would generate about $67 million in revenue for the state annually, according to Greg Albrecht, chief economist for the Legislature. State lawmakers who supported the bill want to use that cash to help close a $1.6 billion budget shortfall Louisiana is facing next year. The extra money from the cigarette tax increase would go toward covering state health care expenses, under the current language in the bill.
The public is thought to be more open to a cigarette tax increase than any other tax hikes being considered, which is one of the reasons House moved the bill before any other revenue-raising measure.
In a recent poll conducted by LSU, about half of the respondents said they could live with a a cigarette tax increase. No other tax increase proposed – including those on alcohol and the oil industry – was as acceptable to respondents.
Proponents of the legislation said a cigarette tax would not only provide much needed revenue for state health care services, but should also improve the health of the Louisiana public. It could also save Louisiana money typically devoted to covering smoking-related medical expenses.
Smoking-related health care services cost Louisiana around $700 million annually, according to Jan Moller, head of the Louisiana Budget Project, a left-leaning think tank in Baton Rouge. Stephen Kantrow, a lung doctor with LSU in New Orleans, attributed $800 million in Louisiana’s Medicaid budget annually to cigarette-related diseases.
The cigarette tax hike still faced opposition. Groups representing small retail outlets – like convenience stores and gas stations – said the legislation would result in job losses. They also said the tax disproportionately affects poor people, who tend to smoke more.
Initially, the legislation was drafted to increase the cigarette tax even more – to the national average of $1.54 per pack. Then, the bill was amended to impose a smaller hike for political reasons. Lawmakers said the legislation wouldn’t have gotten very far if the cigarette price hike remained as high as it was in the original bill.
“I don’t want the bill dead,” said Rep. Harold Ritchie, D-Bogalusa, who sponsored the bill. He agreed to a more modest tax hike than he had initially proposed because he wanted to give the legislation the best chance to pass.
Even with the lower tax rate, the bill still garnered some no votes from committee. Five of the 16 lawmakers at the meeting voted against it. Some of those opposed said they weren’t willing to support a tax increase under any circumstances. Others said they didn’t think a modest cigarette tax hike was doing enough to solve the state’s budget crisis.
“I don’t think a piecemeal [budget] plan is really going to work,” said Rep. Robert Johnson, D-Marksville, who voted against the legislation.
There are reasons to think that the full Louisiana House might vote down revenue-raising measures like a cigarette tax, since members haven’t demonstrated a whole lot of willingness to raise other taxes and fees so far.
Last week, the lawmakers voted down two relatively modest bills to raise fees, which worries legislators looking to pass more significant – and politically difficult – revenue-raising measures.
One piece of failed legislation (HB 773) would have simply increased the cost of applying for business incentive programs. Legislators who are looking to pass much more significant tax legislation are troubled that a bill to increase application fees – which doesn’t have a large dollar figure attached to it – was unable to get off the floor.
On top of the cigarette tax, the House Ways and Means is scheduled to take up a few bills that would roll back business tax credits and close a corporate tax loophole, among other things, on Monday evening (April 27.) Most lawmakers are facing reelection this year, and several of these proposals, are much more unpopular with the business community than the cigarette tax.
So far, Gov. Bobby Jindal administration said he would not initially oppose the cigarette tax or the other tax credit repeal efforts coming up in the House Ways and Means Committee – for the sake of moving a plan to solve the state budget crisis forward. However, if legislators can’t find a place to cut state taxes in an equivalent amount elsewhere, it’s likely the governor will oppose the legislation.
Jindal is trying to keep a “no tax” pledge issued by a Washington D.C. group called Americans for Tax Reform. The pledge prohibits Jindal from approving a traditional state tax increase, unless there is corresponding state tax cut elsewhere. This means if the cigarette tax is raised by $67 million, the legislators have to find a $67 million tax cut in another area to gain the governor’s approval.
The Legislature’s leadership initially said it will go along with the restrictions imposed by Jindal’s “no tax” pledge, but there are signs lawmakers could move in a different direction if the limitations prove too difficult to meet.
“We are trying our best to work within the guidelines he suggested,” said Senate President John Alario, in an interview last week, “We are going to give it our best to get it done.”
A few legislators are also imploring their colleagues to take more of a leadership role in crafting the state spending plan. Traditionally, state lawmakers gives the governor a tremendous amount of leeway when it comes to the Louisiana budget and taxes.
In three decades, the Louisiana Legislature has only voted to override a governor’s veto a couple of times. This means that governors in Louisiana typically have the final say on how state money is spent and what taxes are raised. But a few lawmakers have hinted the lawmakers should play a bigger role in that process.
“I am convinced that any budget solution will have to be legislatively driven. The only way we can succeed is for all of us here in the Legislature, to work together,” said state Rep. Joel Robideaux, R-Layfayette, the head of the House Ways and Means Committee.
A proposed statewide cigarette tax increase is the first bill to address a $1.6 billion budget hole that has left committee hearings to be voted on by the Louisiana House of Representatives. The measure would increase cigarette taxes by 32 cents per pack.
