Cliff Plan: Sound Familiar?

Jan 4, 2018

Just 15 days remain until Gov. John Bel Edwards’ self-imposed deadline for legislative leaders to agree on a fix for the fiscal cliff.

 

“Jan. 19 — the day we present our executive budget proposal," he says is the last day for an agreement, in order to call a special session prior to the March 12 start of the regular legislative session.

Though there’s been no official word on where negotiations stand, the governor’s proposals are fairly straightforward.

“We make permanent the reductions to tax credits, deductions and rebates that are going to sunset the end of this fiscal year," Edwards says.

"We compress the income tax brackets and reduce the excess itemized deductions from 100 percent to 50 percent.The fifth penny will roll off the books, as scheduled; and the four pennies that we keep, we will clean those from exemptions. Finally, I would expand sales tax to certain services. So this is a classical way to lower the rate and broaden the base, as it relates to the sales tax."

If this all sounds familiar, that’s because the components have been tried as bills in sessions the past two years. They're also all recommended budget fixes proposed by the Tax Reform Task Force. The governor admits some parts do sound similar to the 2002 Stelly Plan — a constitutional amendment that eliminated some state sales taxes in exchange for increased income taxes.

"There are some portions that deal with the individual income tax — which is what Stelly dealt with, primarily. One is on excess itemized deductions, which under Stelly actually were zero,” the governor says.

In 2007, the legislature fully restored excess itemized deductions. In 2008, they returned the income tax brackets to pre-Stelly rates.

Edward doesn't expect to return income tax brackets to the full Stelly numbers — though he says it has been discussed. Instead, he expects the recently-enacted federal tax reform to mean a lesser adjustment will be needed.

"It could have a positive impact, because of corporate and individual income taxpayers paying a little bit more to the state, because their deductions for their federal tax liability are going to be smaller," Edwards explains. "And so if that happens, then we certainly wouldn’t have to move the brackets as much as would be the case without that assistance."