Tax breaks possible despite shortfall

• By MARK BALLARD AND MICHELLE MILLHOLLON
• Advocate Capitol News Bureau
• Published: Dec 19, 2008 - Page: 7A - UPDATED: 12:05 a.m.

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Gov. Bobby Jindal said Wednesday that despite budget cuts across state government, he is open to additional breaks for taxpayers.

“We will be supportive of reasonable tax credits,” Jindal said. “They have to make sense. …  We would ask the Legislature that they (tax break proposals) would be accompanied with spending cuts.”

The governor and his staff are trying to figure out how to absorb the decline in revenue and tax cuts in the upcoming budget year. Higher education and health care are expected to sustain sizable cuts.

The administration announced earlier this week that state government also had to trim this year’s $30 billion budget by $341 million.

Despite the state’s financial problems, there is talk among legislators of eliminating the state income tax entirely, expanding the private-school tuition tax break and creating a tax deduction for homeowners’ uninsured costs.

Jindal said the proposed tax breaks must come with specific budget reductions to cover the loss of revenues created by credits or deductions.

A tax credit lowers the taxes owed. A deduction reduces the income that is taxed. Both decrease the amount of money the state collects in taxes.

Jindal cited a proposal to continue tax credits for the film industry as a model for legislators to follow. The governor said those tax breaks benefit an industry that provides a wide array of jobs.

Jindal said he would not raise taxes to meet the current budget shortfall, nor would he undo previous tax credits. Jindal specifically said the so-called Stelly rollback was safe.

Voters in 2002 approved a tax swap that was named for former state Rep. Vic Stelly, the Lake Charles lawmaker who sponsored the constitutional amendment. The measure repealed the state sales tax on groceries and utilities while compressing the state income tax brackets. Some taxpayers ended up owing the state more money.

Earlier this year, the Legislature returned state tax rates to pre-Stelly levels, resulting in a reduction for some taxpayers at a cost to state government.

The Stelly rollback was not accompanied with spending reductions. But Jindal said the $190 million loss in state revenue is accounted for in his budget for the next budget year.

In the budget year that starts July 1, the state faces a $1.1 billion drop in tax collections and other revenue sources that finance state services. Stelly is expected to reduce state revenue by $308 million for the 2009-10 budget year.