Louisiana lawmakers appear set to approve a $463 million tax hike by extending nearly half of a penny sales tax that was set to expire at the end of next week. The tax increase would last for seven years.
In a stunning turnaround late Friday afternoon in lawmakers' third special session of 2018, the state House voted 74-24 to extend the sunsetting penny sale tax by .45 percent. The measure now moves to the Senate, which is expected to approve it this weekend.
House Bill 10, introduced by Rep. Paula Davis, R-Baton Rouge, would increase the state sales tax to 4.45 cents effective July 1. It is just $44 million shy of the $507 million Gov. John Bel Edwards argued was needed to fund the largest government budget in Louisiana history. Edwards has been pushing for a half-cent sales tax extension.
Every single Democrat and 32 Republicans voted for the bill, including House Speaker Taylor Barras, R-New Iberia. Republicans previously opposed voting for the half-cent increase but today agreed to the .45-cent hike. The .5-cent difference is actually little different than what was passed (.45 rounds up to .5 on a dollar purchase).
Louisiana's current sales tax is 5 cents on the dollar. That was set to decrease to 4 cents June 30 before the extension talks. Combined with local sales taxes, consumers pay an average of more than 10 cents in sales taxes in the state, highest in the country.
While lawmakers on both sides of the aisle cheered the "compromise" deal, others were sharp in their criticism.
"Today’s vote in the House is disappointing," Daniel Erspamer, CEO of the Pelican Institute, told Watchdog.org. "The facts show clearly that raising taxes on Louisiana families will lead to fewer jobs and a decline in our state’s already-down economy. It’s tough to watch our elected officials continue to embrace a broken status quo of tax and spend government, and we hope this is a wakeup call for the fundamental changes that are desperately needed to bring jobs and opportunity back to Louisiana."
Louisiana's economy and its tax policies have been ranked among the worst in the country.
John Kay, Louisiana state director for Americans for Prosperity, noted on Twitter that neighbor Texas' top allowable combined local and state sales tax rate is 8.25 percent.
"Not only are we not trying to compete with them, we're actively putting ourselves further behind them," he wrote.
Miriam Roff with Americans for Tax Reform said that since 2016, Edwards has been using “fear mongering” to bully legislators to vote for tax increases.
“In an attempt to gain support from Louisiana legislators for the largest tax increase in the state’s history, Gov. John Bel Edwards has resorted to fear mongering, holding college football and special needs funding hostage," she said. "Unfortunately for taxpayers, it appears to be working.”
In May, Edwards' administration sent letters to about 37,000 Medicaid recipients informing them that their benefits may soon come to an end due to the budget impasse, an outcome they claimed would force tens of thousands of disabled seniors citizens in nursing homes to find a new place to stay at the end of June.
Republicans called the move a sad scare tactic meant to frighten senior citizens but with not basis in reality.
Edwards has maintained that at least a half percent extension was needed to fill what his administration said is a $648 million budget gap. During the second 2018 special session earlier this month, Republican leadership wanted to explore more spending cuts and a one-third or .4 percent extension.
Earlier Friday, the Democrat-led Senate Revenue & Fiscal Affairs Committee advanced a resolution to raise nearly $1 billion by allegedly circumventing the state constitution to extend the full penny set to expire on June 30. That measure likely won't go anywhere after the House action.