For months, the conservative Republicans known as Fiscal Hawks have said that Louisiana should not balance its budget anymore with short-term fixes or gimmicks.
But a new proposal they pushed Thursday seems to do just that, after the Fiscal Hawks retreated from a plan that Gov. Bobby Jindal and business leaders attacked Tuesday and Wednesday because it would have required some businesses to pay more in taxes.
The proposal will be debated Friday in the House, and I will live blog it below.
The new plan projects raising $200 million a year – of the $526 million it would bring in overall per year – by launching a tax amnesty program that would last for nearly three years.
Budget experts question the plan.
“It’s a very risky way of balancing the budget,” said Jim Richardson, a Louisiana State University economist who sits on the four-member Revenue Estimating Conference that is about to meet to determine how much of the higher-than-projected revenue collected by the state Treasury can be spent. “I don’t see any way our conference can buy into that figure without more information.”
“Any way you cut it, it’s one-time money,” said C.B. Forgotston, an attorney and longtime budget expert whom the Fiscal Hawks have regularly consulted. “It goes against what the Hawks have been preaching. It’s also highly speculative. It’s a best guess of who will choose to pay.”
Under the amnesty program, people with outstanding tax bills could pay without incurring penalties or interest they’d normally face, at least for the first year.
State Rep. Brett Geymann, R-Lake Charles, the Fiscal Hawks’ leader, said he understood the complaints.
“It’s not my preference,” he said. “But it’s the piece that got us where we needed to unify this body,” referring to the House.
Democrats joined with the Fiscal Hawks Thursday afternoon on the steps of the state Capitol to voice their support for the overall plan, which would replace $526 million in Jindal’s budget that is available only for one year or that is contingent upon the sale of property or a financial settlement. The House appears set to approve the plan on Friday. Doing so would affect $526 million of Jindal’s proposed $24.7 billion budget. It would require 70 votes in the 105-member chamber.
“The big picture is that the legislative body rightly took back its authority to be involved in the budget process,” Geymann said, referring to complaints that the House has regularly accepted Jindal’s budget and then watched the budget fall out of balance and suffer cuts midyear.
After Friday’s vote, the Senate would have to decide whether to accept the House’s budget or rewrite it and return their version to the House for approval. Jindal could veto the final version.
The governor told reporters Thursday afternoon that he would veto the budget if it retained trims in tax breaks for the motion picture industry, enterprise zones and retail vendors contained in the Fiscal Hawks’ plan.
Jindal said he “wasn’t philosophically opposed” to the amnesty plan, noting that he included one in his failed effort earlier this year to eliminate the state’s income tax system.
The Fiscal Hawks turned to the tax amnesty Wednesday night after the attacks by the governor, the Louisiana Association of Business and Industry and other business groups peeled away too many Republicans from their original plan.
State Rep. Joel Robideaux, R-Lafayette, offered a 30-month tax amnesty as an alternative. Robideaux sponsored Jindal’s proposed amnesty.
Robideaux said the new proposal would raise $200 million in the first year. He didn’t know how much it would generate after that, but others put the amount at $400 million more over the subsequent two years. The plan would waive all interest and penalties in the first year and less so after that. Delinquent taxpayers could spread their payments over multiple years.
The analysis by the Legislative Fiscal Office for Robideaux’s one-year proposal would raise $150 million to $175 million per year, or less than the new plan projects. The analysis also said the total amount of uncollected taxes amounted only to $700 million.
State Rep. Cameron Henry, R-Metairie, a leading Fiscal Hawk, said he feels comfortable with the $200 million per year figure because the last tax amnesty, in 2010, was expected to raise $150 million but collected more than $400 million. The fiscal office said the exact amount was $482 million.
Richardson urged caution, however.
“It’s almost impossible to predict how much you’ll get,” he said.
Jan Moller, who heads the Louisiana Budget Project, a Baton Rouge-based group that favors higher taxes on the wealthy, noted that the tax amnesty is supposed to replace the uncertain one-time money in the budget.
“You’d be replacing one iffy source of revenue with another,” Moller said.
Tim Barfield, Jindal’s point man on tax issues, expressed concern about having another tax amnesty program only four years after the last one. He said Jindal wanted one because it would help settle lawsuits over income taxes owed as the state’s income tax disappeared.
“If you always have an amnesty program, the danger is that the taxpayer is going to wait until there is an extra incentive to settle,” Barfield said. “Like a product that’s always on sale, you won’t get the boom if you announce another sale.”