This op-ed was originally published in The Advocate in Baton Rouge, Louisiana.
If you find yourself in a hole, stop digging. This is exactly what Louisiana Senators did when they rejected two tax-cut bills that would have created a billion-dollar shortfall in the coming fiscal years.
House Bill 578 would have reduced the state’s sales tax from 5% to 4.75% costing the State General Fund $266 million a year by 2028, while House Bill 667 would have cut the personal income tax from 3% to 2.75% and allowed seniors to claim an additional standard deduction, costing the state $378 million a year by 2028. The Senate also rejected a constitutional amendment that would have eliminated the state’s rainy day fund to help fund the cuts.
The state was already projecting a $590 million budget shortfall in the coming fiscal years. When you add the proposed tax cuts to this, you get a cool $1.2 billion deficit by 2028.
These tax cuts would have followed major changes passed last year that cut taxes for corporations and traded our state’s tiered personal income tax structure for a flat 3% rate — all while making low- and middle-income households disproportionately foot the bill by increasing our state sales tax to 5%.
State Sen. Franklin Foil, R-Baton Rouge, chairman of the Senate Revenue and Fiscal Affairs Committee, pointed out that the scenario felt too similar to 2008 when Louisiana lawmakers unanimously approved a tax cut at a time when the state was flush with cash due to many factors, including windfalls of federal dollars post-Katrina.
Back then, lawmakers were unaware that a few months after they left Baton Rouge, the market would crash, leading to skyrocketing unemployment and plummeting state revenues. Then-Gov. Bobby Jindal and the Legislature chose to cut the budget to the bone instead of raising taxes, leading to huge hikes in tuition at Louisiana’s public universities, stagnant funding for public education and underfunded public services that are still generating lawsuits to this day.
But unlike 2008, when few people were projecting a global market crash, there are clear warning signs today showing how detrimental these tax cuts could be. And these warning signs are in addition to the fact that major economists and banks are projecting a possible recession.
The pending federal cuts to Medicaid and the Supplemental Nutrition Assistance Program could devastate our state finances as Louisiana’s state budget is more reliant on federal dollars than almost any other state in the union. With our paltry $7.25 per hour minimum wage, disinvestment in social programs, underfunded public schools and poor workforce conditions, we consistently have one of the highest poverty rates of any state.
This forces a significant portion of Louisianans to rely on Medicaid and SNAP to make ends meet. Nearly 1 in 3 Louisianans get their health insurance through Medicaid. And about 1 in 5 receive assistance through SNAP. These are our neighbors, co-workers and friends.
While making Louisianans sicker and hungrier would undeniably have a ripple effect through our state’s economy, our state lawmakers face other budget threats that make their decision to hold onto every dollar we have the right one. Hurricane season began June 1. The Trump administration has already slashed 30% of the Federal Emergency Management Agency’s staff and has talked about eliminating the agency altogether.
The president is also denying disaster aid to both blue and red states after major weather events like tornadoes in Arkansas, flooding in West Virginia and continued Hurricane Helene relief in North Carolina. Louisianans can’t bank on the federal government’s assistance when we are inevitably hit with a major hurricane.
Recent history should be our guide. Less than four years ago, when Hurricane Ida hit as a Category 4, our state took $18 billion in insured losses while over 1 million households were left without power in the dead of summer.
Louisianans who have been around a while know far too well that rushed and ill-timed tax cuts can quickly result in the decimation of health care, education, public safety and other services Louisianans expect to function when we need them. Amid so much fiscal uncertainty, other states should heed the warning from Louisiana lawmakers who know preserving revenue during this time is paramount to weathering whatever comes down the line.
