- Associated Press - Wednesday, June 15, 2016

BATON ROUGE, La. (AP) - With no votes to spare, lawmakers on the House tax committee Wednesday backed a complicated proposal that could temporarily decrease a state income tax deduction to raise more than $100 million for next year’s budget.

But they rewrote the measure to make it a sort of short-term loan from taxpayers to the state.

The bill may not have looked the way Gov. John Bel Edwards wanted to help lessen cuts to health and education programs in the financial year that begins July 1. But the 10-9 vote of the Ways and Means Committee was a victory for the Democratic governor nonetheless, because it moves the bill to the House floor for debate, where it can be changed again.

To get the measure out of committee, lawmakers agreed to a heavy rewrite crafted by Chairman Neil Abramson, D-New Orleans, that could leave the state on the hook for paying back as much as $257 million to taxpayers in two years.

Rep. Barry Ivey, R-Baton Rouge, described the revamp as “some of the worst tax policy I’ve ever seen.”

As rewritten, the bill could make a two-year decrease to a tax break for those who itemize deductions on their income tax returns. About 23 percent of individual taxpayers itemize for things like home mortgage interest payments, charitable contributions and medical costs, according to the revenue department.

For the 2016 and 2017 tax years, taxpayers who itemize would get either the full deductions allowed for charitable contributions and home mortgage interest or 57.5 percent of the previous level of deductions allowed, whichever is greater.

The cut to the tax break, however, would never kick in if other taxes passed by lawmakers bring in more dollars than expected.

And the whole provision would expire on Jan. 1, 2018 - with taxpayers then allowed to collect the tax breaks they weren’t able to take for the two previous years.

Abramson described the proposal as a “last-resort, safety-net, short-term loan if we need it,” until a large-scale rewrite of the state tax structure planned in 2017.

Some lawmakers suggested they supported the bill in its rewritten form simply to get it to the full House for debate. Others trashed Abramson’s rewrite.

“It is so out of whack from what is normal, it’s hard to describe it,” Ivey said.

Abramson replied: “In trying to deal with the unprecedented crisis, sometimes you need unprecedented ideas.”

Dawn Starns, state director of the National Federation of Independent Business, spoke against the bill in any form. She said of the taxpayers who itemize, about three-fourths are small businesses, and she said they can’t afford higher taxes.

Lawmakers are more than halfway through an 18-day special session called by Edwards to raise taxes. The governor wants another $600 million for next year’s budget, saying that’s needed to stop deep cuts.

The House, where most tax bills must begin, has agreed to about $210 million so far, largely with a tax increase on health care entities known as HMOs.

Senate leaders want to reach $450 million.

To fill the gap, senators Wednesday began advancing a proposal by Sen. Rick Ward, R-Port Allen, that would force large manufacturing facilities to choose between two property tax breaks they receive.

Ward’s bill is estimated to save the state treasury $146 million annually. The proposal, approved by the Senate Revenue and Fiscal Affairs Committee in a 7-4 vote, faces fierce opposition from groups representing the chemical industry and other large manufacturing facilities.

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House Bill 38 and Senate Bill 10: www.legis.la.gov

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Follow Melinda Deslatte on Twitter at https://twitter.com/melindadeslatte


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