Cut taxes? No, lawmakers decided. They’d rather spend surplus money on roads and bridges | Legislature

In 2008, with the state treasury flush with tax dollars from post-hurricane spending, the Legislature cut taxes to put more money into the pockets of Louisiana residents.

The treasury is swollen again this year with federal aid and tax revenue from the post-pandemic economic recovery. But this time, lawmakers have turned aside requests to cut taxes.

That may seem surprising given that Republicans hold a legislative majority and the GOP has made its name as the tax-cut party. Republicans led the push for the 2008 tax breaks.

But this time, the Legislature’s leaders say they would prefer to spend the money on badly needed new roads and bridges than give it back. They say it is a more prudent approach, in part because of the budget problems that followed the 2008 tax cuts.

“In 2008, we spent the surpluses and cut taxes and turned around for eight years to deal with mid-year budget cuts year after year,” Senate President Page Cortez, R-Lafayette, said in an interview. “It’s much better for the state to take surplus dollars and fix some of our one-time issues that are problematic.”

Cortez and others also note that Louisiana will cut the state sales tax in 2025 if a temporary levy expires as planned.

Louisiana is like many states that find themselves in a surprisingly strong position today.

“Early in the pandemic, there was the expectation that states would struggle with revenue losses,” said Jared Walczak, state policy director for The Tax Foundation, a right-leaning nonprofit in Washington, DC “But we’ve seen the opposite. Many states have posted record revenues and surpluses. Many lawmakers have thought to return at least a portion of this revenue to taxpayers.”

The push to cut taxes in 2008 was led by then-state Sen. BL “Buddy” Shaw, a Republican from Shreveport. He said voters had told him time and time again that they wanted the Legislature to repeal the so-called Stelly plan that voters had approved statewide in 2002.

Stelly had eliminated the state’s sales tax on food and residential utilities – a temporary levy that had been renewed repeatedly – ​​in exchange for an increase in income tax rates for all but the lowest income earners.

Shaw called for repeating the increase in income tax rates. His proposal picked up momentum, and in time, then-Gov. Bobby Jindal supported the plan. It costs the treasury about $800 million per year, mostly benefitting upper-income taxpayers.

The timing was bad. High oil prices evaporated, costing the state hundreds of millions of dollars a year, and the national economy went into a deep recession.

“The general fund went from revenues of about $12 billion to just over $9 billion in about two years,” Jim Richardson, an LSU economist who is an expert in state budget finances, said in an email. “The tax cuts probably accounted for about 30% of the shortfall.”

Richardson added that the tax cuts “did nothing to stimulate the economy — other factors were much stronger, such as the national downturn and the oil price/natural gas price reductions.”

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That analysis helps explain why lawmakers are not cutting taxes during this year’s legislative session, which concludes Monday.

The Legislature had about $2 billion available for one-time needs when preparing the budget for the fiscal year that begins on July 1. Some conservatives called for tax cuts, but the idea never gained political traction.

Instead, Gov. John Bel Edwards, a Democrat, and the Republican legislative leadership agreed to direct virtually all of the money to one-time needs rather than recurring expenses.

Groups such as the Public Affairs Research Council of Louisiana endorsed the approach.

The state also is directing money to the trust funds that pay unemployment benefits and that bank money for fiscal rainy days and for paying down pension debts.

The Legislature and Edwards are spending $200 million on a new bridge over the Calcasieu River in Lake Charles; $200 million to extend I-49 south of Lafayette; $450 million to upgrade water and sewer systems around the state; $400 million to pay a post-Hurricane Katrina debt to the federal government for strengthening the New Orleans-area levee system; and $300 million to build a new bridge over the Mississippi River near Baton Rouge. Edwards had sought $500 million for the Baton Rouge bridge.

“Everybody complains about the deplorable condition of infrastructure in the state,” said Sen. Bret Allain, R-Franklin. “We’re finally putting some funds toward that.”

Lawmakers are also spending at least $100 million to repair existing roads and bridges and another $100 million to fix up old buildings at public colleges and universities and at state buildings.

“In the long run, all of these projects will provide incentives for businesses to grow the economy. This will provide dividends in the future,” said Rep. Jerome Zeringue, R-Houma, who chairs the House budget committee.

To be sure, lawmakers have also stuffed the budget with what some consider pork-barrel spending, with $105 million in pet projects that mostly received little public vetting.

As a result, taxpayer money will be spent on three churches in Breaux Bridge in St. Martin Parish, a public splash park in Luling in St. Charles Parish, a civic association on the west bank of Jefferson Parish and a public golf course in Shreveport .

Legislators said another reason not to cut taxes this year is that a temporary sales tax enacted in 2018 that generates .45 cent, less than half a penny on every dollar spent is scheduled to expire in mid-2025. It adds about $420 million per year to the state budget.

The expiration of that sales tax would provide a savings of about $65 per year for the nearly 70% of Louisiana households that earn $50,000 or less, according to Richardson. A household earning $100,000 would save about $130 per year if the temporary sales tax vanishes as planned.

Rep. Tony Bacala, R-Prairieville, sought to phase out the sales tax over the next three years. The House approved Bacala’s House Bill 438, but it died in the Senate because senators decided they would rather direct that money toward upgrading the state’s infrastructure.

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