BATON ROUGE, La. (BRPROUD) – Lawmakers are looking to potentially roll off the temporary half-cent sales tax early in hopes to fight off a fiscal cliff. But some fear what cuts could be coming.
Rep. Tony Bacala’s bill HB438 looks to slowly phase out the temporary half-cent sales tax that is set to sunset in 2025. Economists predict the state will be faced with a fiscal cliff that year and Rep. Bacala said his bill will make it more of a gentle hill.
The temporary .45% sales tax brings in 420 million dollars a year. It was put in place to deal with the severe deficit that the Edwards administration inherited in 2016. It began as a whole cent sales tax but was reduced in 2018 after the economy began to bounce back.
Economists also predict the steep growth in the economy after the pandemic slowing down will put an impact on the state budget. Rep. Tony Bacala wants to soften the blow of the loss of the sales tax and start making the legislature figure out how to behave without that money.
“Unless you’re willing to vote to extend the .45 forever, I think it’s the wise thing to do to start adjusting ourselves to the loss of that revenue,” Rep. Bacala, R-Prairieville, said.
His plan is to cut the tax collection by .15% over two years starting in 2023 – so it doesn’t affect the budget they’re already working on. That means in 2023 the sales tax will be .30% and in 2024 it will lower to .15%. Some oppose the bill because they want a plan in place of how to replace the money.
“Going over the cliff means cutting the state budget and cutting services citizens need. That would be a choice of this legislature. They don’t have to make that choice, they can replace that revenue with other revenue,” said Jan Moller, Executive Director of the Louisiana Budget Project.
The legislature can only create new revenue streams in fiscal years, which 2022 is not. Some believe that this issue should not be dealt with until next year when it is a fiscal legislative session. The LA Budget Project has concerns there will have to be big cuts to education and other critical parts of the state to make up for the loss of $420 million.
Some fear it is similar to what happened after Hurricane Katrina when there were major rollbacks in taxes, which led to the deficit that created the tax. Rep. Bacala said it is a totally different situation and preparing now will prevent such negative repercussions.
“We can continue to roll as we are and hope we can fix a 650-million dollar deficit when you come back into session next year or we can start adjusting to the fact that we’re going to be on a lesser income,” Rep. Bacala said.
He said it would be bad for the state to “keep kicking the can down the road” and deal with the fiscal cliff later on. He points to the continued years of surplus and excess as ways to deal with the loss of funds from the tax. He originally brought the bill in hopes to have other lawmakers refine it to find a good solution. Bacala said he was not approached by anyone in the governor’s office on the bill.
There is another bill moving through the legislature by Rep. Rick Edmonds that would start putting the half-cent sales tax money towards roads and bridge projects. Despite push back on his bill creating a fiscal cliff sooner, it passed the Ways and Means Committee. Rep. Bacala said he wants to have options to be debated on the House floor and would be willing to find a way to make the bills into one if that is what the body wanted.