Lack of “sin tax” compromises means Louisiana’s budget hole remains $250 million

Kevin McGill

Monday, June 5, 2000 | 8:25 a.m.

BATON ROUGE, La. - Increases in alcohol and cigarette taxes were approved Sunday night by the Senate, but, even if the House goes along with the measures, they will cover less than a third of the $250 million hole in the state budget.

There was no apparent consensus Sunday night on a third "sin tax" - an increase in riverboat casino taxes. Negotiations on that issue were continuing among lawmakers and lobbyists.

The session ends Wednesday and by that time lawmakers must approve a $13.8 billion state budget for the fiscal year that begins July 1.

The alcohol tax approved Sunday night would add 5 percent to the cost of drinks sold in bars and restaurants. It would bring the state an estimated $60 million a year in new revenue. Its passage in the House was uncertain.

The tobacco tax increases the price of a pack of cigarettes from 20 cents to 24 cents. Smokeless tobacco would go up 20 percent. Cigars would not be affected.

The tax take would be an estimated $18 million. Its passage in the House was more likely since that body has already approved a similar measure before.

A bill to increase riverboat casinos' taxes also is likely to come up for a vote before the legislative session ends Wednesday at 6 p.m. Various increases ranging from 1.5 percent to 8 percent have been suggested, with the Senate favoring the higher level.

A House-Senate compromise committee was expected to meet on the matter again Monday to try to reach an agreement acceptable to the Senate and the House. Any tax compromise would have to be approved by a two-thirds vote in each chamber.

It will likely be much less than is needed to cover the $250 million hole, meaning some other type of tax will likely be considered before session's end.

The liquor-by-the-drink tax was approved 27-7 in the Senate. The tobacco tax was approved on a vote of 33-5.

As it stood Sunday night, the 2000-2001 budget listed $250 million in unfunded items. Those items included health care programs and half of the supplemental pay the state provides for police officers and firefighters around the state.

Sunday afternoon, House Speaker Charlie DeWitt noted that business interests have succeeded in derailing tax bills this session. He warned that taxes will come back to bite business in an even bigger way unless the special interest's lobbyists are willing to bend a little now.

He said voters will begin complaining when the budget cuts become evident. When that happens, lawmakers will return in a mood to tax everything, DeWitt added.

Meanwhile, scores of uniformed police officers and firefighters from various localities milled about the Capitol hoping to save the $150 a month the current budget would cut from their state supplemental pay.

Alcohol industry lobbyists argued vehemently against the liquor-by-the-drink increase. But a conference committee of three House and three Senate members advanced the tax Sunday evening to the full Senate, where it was approved without debate.

Restaurant industry lobbyist Jim Funk said the tax will harm many restaurants but Sen. Bill Jones, D-Ruston, expressed the prevailing sentiment on the committee. He argued that the tax, based on Funk's rough price estimates, would add only about 18 cents to the price of the average drink - a small part of an overall restaurant bill.

"I don't think it'll keep anyone from buying the meal or the drink," Jones said. "And the only people who will pay the tax are the people who choose to drink mixed drinks. And I think that's fair."

Chris Young, lobbying for licensed alcohol businesses, argued that the tax is not fair at all. "It's piling on to a product that is already the highest taxed product in Louisiana," said Young.

The measure still needs a hard-to-get two-thirds vote in the House, which adjourned Sunday afternoon without acting on it. If the measure fails in either chamber, it is dead for the session.

The conference committee was assembled to work out differences between the House and Senate on the bill - and those differences were huge.

The bill started out as a measure to simply extend a tax exemption on boiler fuel. That is how it left the House. But the Senate altered the bill to include the 5 percent tax.

The tax amount would remain the same under the conference committee's revamped measure. Only methods of collecting it were altered.

Similar conference committee meetings were held Sunday evening to work out differences between the House and Senate on tobacco taxes - the Senate greatly extended House increases on cigarettes - and on riverboat casinos.

As the riverboat meeting started, Rep. Ronnie Johns, R-Sulphur, announced that no vote would be taken because the committee needed more time - perhaps a day or so.

The House began work on the state budget weeks ago. House members sent the budget to the Senate with $370 million in unfunded programs but proved reluctant to pass enough taxes that would erase the shortfall.

The Senate added greatly to the tax bills, bringing the total of the three to more than $200 million, while a Senate committee reworked the budget, slashing some programs all together and reducing the number of unfunded programs to $250 million. The budget was before the full Senate as of Sunday evening but it was unclear whether the Senate would act on it.

Johns, as author of the riverboat bill, was chairman of his conference committee and indicated he was not able to go much above the 3 percent tax increase passed by the House.

The casino industry supported Johns' bill because the casinos got a sweet deal in the process. The bill also called for the cruising boats to go dockside. Also, any boat that invested from $200 million to $250 million in its facilities would not have to pay the extra tax.

The Senate rejected the dockside idea and the investment credit. In addition, the Senate raised the tax increase to 8 percent.

"We cannot balance the budget on the backs of just one industry," said Johns.