At a press conference on Tuesday, Governor Edwards introduced options for stabilizing Louisiana’s long term budget and the $1.9 billion hole expected next fiscal year.
Edwards described the proposals as a menu of options for legislators to deal with the shortfall, which is due to lower-than-expected income and sales tax revenue, previous use of one-time money, and the falling price of oil.
"That 1.9 billion is not premised upon growing government. If we simply want to provide the state services next year that we are providing this year, we are $1.9 billion short," explained Edwards.
To fix that problem and create a more stable budget in the long term, Edwards says the state needs more revenue. According to the state’s constitution, that revenue will have to come in the special session, which is expected to begin February 14.
On the menu: increasing the tobacco tax from $0.86 to $1.08; repealing the business utilities sales tax exemption; establishing a flat monthly tax of five percent for landline and cell phones; and suspending certain tax credits for businesses.
"In order to close that shortfall, most of these items, we believe, will end up having to be selected," remarked Edwards.
In the long term, that could also include changes to the income tax brackets, says Kimberly Robinson, Secretary of the Department of Revenue. "We’re also looking at presenting the voters with a constitutional amendment that would allow them to repeal the federal income tax deduction in exchange for lowering the rates," she says.
The current rates are two, four and six percent. Should the people approve, income tax rates could be moved to one, three and five percent. Changing the corporate tax rate is also an option. Currently four, six and eight percent, Edwards’ long term budget plan would create a flat corporate rate of five percent.