Senate undos some cuts OK'd by House

Lawmakers have been debating Gov. Jeff Landry’s tax-overhaul proposals. (Photo by Hilary Scheinuk / The Advocate, Pool)

BATON ROUGE — Some tax cuts adopted by the state House of Representatives last week were undone by a Senate committee on Tuesday when it took up major elements of the governor’s tax proposals.

The Senate Revenue and Fiscal Affairs Committee backed away from abolishing tax credits for historic preservation of buildings and production of movies and TV shows. The committee also rolled back a corporate income tax cut from a 3.5 percent tax rate adopted by the House to a 6 percent rate, not as generous as the House, but still lower than the existing top rate of 7.5 percent.

Meanwhile, the House has not moved forward with Gov. Jeff Landry’s original plan to pay for income tax cuts partly by creating sales taxes on more than 41 services like car washes.

The list has been whittled to 19 items, and it remains possible that lawmakers will take a different approach to raising the revenue, including possibly an increase in the state portion of the sales tax rate on most products purchased to 5 percent from 4.45 percent.

Also on Tuesday, the Senate Finance committee advanced proposals for teacher pay raises, funding for statewide elections and other items. The committee left intact the House-passed 3 percent flat tax on personal income tax, down from a multi-tiered system with rates as high as 4.25 percent.

The full Senate is expected to hear the entire package on Wednesday and possibly vote on Thursday. The Legislature, which is in its third special session this year, must conclude work by Monday.

“The biggest cuts are going to be for folks at the very top, and we’re going to pay for that with more sales taxes,” said Jan Moller, executive director of Invest in Louisiana, a group that advocates for lower-income citizens.

Several major sticking points remain. One is the governor’s original plan to extend state sales taxes to the more than 40 items that are currently tax not taxed.

The House balked at that list, and a shorter list of 19 items made the rounds at the Capitol but it is not clear if any of them will be taxed.

The goal is to raise revenue by other means to cover cuts in income and corporate taxes. As the Legislature carved up the governor’s plan, it was unclear whether the state could afford tax cuts, credits for preservation and Hollywood shows and whether both houses would back the revision by a necessary two-thirds majority.

Wayne Brown, who has restored historic properties in Louisiana, said the state tax credits for those projects provide seed money and represent just 10 percent to 20 percent of the cost of the projects.

He said the developers usually bring the rest of the money in from out of state, often from federal grant funding.

“We have a lot of historic buildings to renovate,” he said, adding that “we really need to keep this program in our state.”

The original list of 40 services in House Bill 9 was brought by Rep. Neil Riser, R-Columbia.

From the moment the bill was brought forward, it faced criticism from both sides of the aisle for taxing such services as pet grooming, lawn care, car wrecking and towing, personal trainers, lobbying, interior design services, event planning and catering, waste collection and much more.

“In general, sales tax is considered a regressive tax,” said Moller. “As a percentage of income, it tends to fall harder on people with low incomes than people with high incomes.”

On Monday, Riser said his shorter list of 19 services would raise an estimated $130 million in revenue down from $502 million from the original list. The shorter list includes services for cable TV, car washing, photography services as well swimming maintenance.

Broadening sales taxes is vital to Gov. Jeff Landry’s reconstruction of the Louisiana tax system.

However, with all the changes and criticisms of the bill, it is unclear if the list of 19 will ever face a vote. It is possible that some or all the remaining services could be added by the Senate to other bills as amendments.

Here's the list of 19 services that could be added to the sales tax. Lawmakers also are considering other options to raise more revenue to offset proposed cuts in income taxes.

1. Alarm system services