Fiscal Cliff Solutions: Back to the Future?

Oct 25, 2017

As the past two years with six legislative sessions have shown, fixing the fiscal cliff is not easy.

“The citizens of this state do not want to raise their taxes,” insist lawmakers.  In fact, the chairman of the House tax-writing committee states, “I can assure you, nobody wants to raise taxes.”

Nobody really wants to extend the fifth penny of sales tax, either.

“It’ll be the permanent temporary penny,” House Appropriations chairman Cameron Henry says, cynically.

Reforming Louisiana’s tax structure appears to be too difficult, as House Speaker Pro Tem Walt Leger has observed.

“We’ve taken up over 300 bills to address structural issues in this state and none of those have been successful.”

So what’s left? Leger says a coalition of Democrats and moderate Republicans in the House is taking a serious look at reviving the Stelly Plan.

“The people of this state voted to implement Stelly in 2002, but when we repealed the personal income tax portion and we failed to address the sales tax exemption portion, we created a hole.” Leger explains. “And we created a structural problem with our finances.”

The Stelly Plan was a constitutional amendment that raised personal income tax rates, while removing the state sales tax on food, utilities, and prescription drugs. It also took away the state tax exemption for excess federal itemization. In 2007 and 2008, lawmakers undid the Stelly Plan by statute, restoring the federal excess itemized deduction, and then returning tax rates and tax brackets to their pre-Stelly levels.

Despite the fact that voters had enshrined it in the state Constitution, taking Stelly apart piece by piece only required a legislative majority vote, unlike other tax measures and Constitutional amendments, which require a 2/3 majority vote from both chambers.

“It’s become very, very difficult to get a 2/3 vote in the House,” Leger observes.

And therin lies the attractiveness of reviving Stelly now: repealing the statutes that undid the Stelly Plan could also be accomplished by a simple majority.

“That would be a significant solution,” Leger says. “It may be the only thing necessary to return us to a place where we’d be able to get back to focusing on how we can grow the economy, and how we can support our colleges and universities, and how we can improve roads, improve bridges and improve infrastructure.”