The Senate Revenue and Fiscal Affairs committee has been reviewing dozens of tax credits, exemptions and rebates at its meetings during the ongoing regular session, but any legislation to change them may have to wait until the 2017 session or a possible second special session this year.
Revenue and Fiscal Affairs Chair J.P. Morrell, D-New Orleans, said the committee is evaluating how effective each law has been.
For credits, that means finding the rate of return on investment and comparing the cost to the state in lost tax revenue to the value it brings to the economy. For exemptions and rebates, it means checking the money the law was intended to save against its current performance.
Morrell cited the utility sales tax exemption as an example of how outside circumstances can change a credit’s effectiveness.
“When [the credit] was passed, the price of crude oil was very high and it was intended to give relief to the energy industry,” Morrell said. “Now, oil is very low and it has become lagniappe; it has become free money.”
Aside from only rolling back tax credits to raise state revenue, Morrell said the meetings would give the committee an opportunity to seek out ways to fix broken credits, or, where they have been effective, expand them.
The Louisiana Department of Revenue and other agencies are providing the committee with data about how often credits are claimed and how much they’re costing the state.
LDR released the 2015-16 Tax Exemption Budget earlier this month, listing the content and cost to the state of about 400 credits. That adds up to about $8.2 billion in lost revenue annually for the state, but the list of credits is not exhaustive.
Just finding all the credits, rebates and exemptions peppered throughout the laws has been enough of a struggle, Morrell said.
“Some of these are so archaic and obscure we’re still finding new ones,” Morrell said.
With over 400 already laid out, the committee split them up by subject matter, and Morrell said they will hear testimony on at least 10 per meeting, but up to 30 to 40 on some days.
In related news, a task force that was established during the special session to target structural tax and budget reforms for the 2017 fiscal session has been filled out and is already meeting to draw up legislative proposals.
The Task Force on Structural Changes in Budget and Tax Policy has met twice, once a week, so far. Right now it’s primarily reviewing the current tax code and how changes from the last two sessions will impact it and incoming revenue.