Reports show early voting has been strong, has been strong, yet predictions indicate low turnout for the March 29th election.
If you haven't already, make a plan to hit the polls. But before you do, you might as well get to know who and what you’re voting for.
There are four amendments to the Louisiana Constitution up for a vote. But one generating the most buzz is Amendment 2, as it has to do with the tax code.
According to WWL’s early voter guide, here’s the fundamentals of amendment 2:
This amendment, 115 pages in length, would rewrite the tax-and-spend portion of the Louisiana Constitution. The amendment includes provisions to undedicate constitutionally-protected funds so that money can be used however the legislature pleases, would make a $2,000 stipend for teachers permanent, and cap the state's income tax top rate at 3.75 percent.
Newell Normand spoke with Daniel Erspamer, Chief Executive Officer of the Pelican Institute for Public Policy, who was able to provide more depth about what's tucked into this amendment.
The below interview has been lightly edited for clarity. But you can listen to the full unedited interview here or in the audio player above.
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Newell (Bold text): Break down amendment #2 for us
Daniel Erspamer (Regular text): Here are a few highlights.
It lowers the maximum rate of income tax allowed in the constitution.
It protects the homestead exemption (which allows for the exemption of property taxes on the first $75,000 of a home's fair market value) and exemptions for religious institutions and nonprofits.
It doubles the standard deduction for our seniors.
It also enacts a government growth limit to constrain the growth of recurring government spending so that budget dollars can be focused on core priorities, one-time infrastructure investments, and ultimately continuing to lower tax rates for Louisiana.
When we say it protects the homestead exemption that's a little misleading. The homestead exemption is already protected in the Louisiana state constitution. You mean that Amendment 2 doesn't touch the exemption at all, right?
Yes. There's been a lot of discussion and confusion about the idea that this may somehow change the homestead exemption. The homestead exemption is preserved in the constitution…with the protection of a two-thirds vote required to make any changes,
Currently, the highest tax rate available is 4.25% and it will drop to 3.75%, and the current tax rate is 3%. What does this provide? This says that the maximum increase that the legislature could take on with a two-thirds vote would be another 3 quarters of 1%?
Yes. There's a maximum already in the constitution. So this is part of a broader reform as the state moves toward trying to get something close to a 0% income tax to compete with our neighbors. This just ensures that there isn't some wild swing as tax rates have already come down that might impact the economy or our taxpayers. So this is just an extra protection in the constitution.
Something that’s caught the eye of seniors is the doubling of the standard individual income tax deduction for anyone 65 and older, and lowering the cap on the overall individual income tax rate that we just talked about. How does this doubling the standard tax deduction work? I think it's. 12.5% for an individual filer?
That's right. The first 12,500 of everyone's taxes are tax-free and should the Constitutional Amendment 2 pass, that will double for Louisiana and 65 and older to the first $25,000 of their income being tax-free.
So that would move from twenty-five thousand for all filers up to fifty thousand dollars for anyone over sixty-five for a joint retired couple, effectively. (There's no income level restriction.)
Let’s talk about the budget stabilization fund, which was the older rainy day fund, and the revenue stabilization trust fund which is a newer mechanism. What happens to these two funds?
There’s the budget stabilization, which we typically call the rainy day fund, and a new fund about seven or eight years ago that we call the revenue stabilization fund, that took any corporate tax revenues over $600 million and put it into a savings account.
That savings account has built up over the last couple of years as tax reform has leveled the playing field and made corporate revenue swingy, less high and low so that that same account built up to over three billion dollars at this point.
The constitutional amendment proposes the merging of those two accounts, increasing the current cap of the rainy day fund and filling it to the cap with resources from the current revenue stabilization fund.
So we're going to have a healthier, larger, rainy day fund and free up dollars into the general fund to help support the transition from some of these tax changes to make sure that goes smoothly and that we can keep down the road of tax reform.
Is the cap on the revenue stabilization fund $5 billion?
Yes.
And what is the cap on the budget stablization fund?
That's going to increase 7% of overall tax collection, which will fill it to $2.5-3 billion total.
So, combined, the new cap is what?
I believe between $2.5-3 billion total.
So we're dropping the cap and making dollars available to the general fund to be spent on the whim of the state legislature? When the revenue stabilization fund was created, we were supposed to be spending the interest on those dollars on a one-time capital project, and the hope was to get to that $5 billion sooner than later...What's changed? Why is this not a good vehicle or mechanism anymore that we'd take these restriced dollars and put it in the general fund.
There's a couple of things to keep in mind.
The state is currently incurring debt to do one-time investments in infrastructure, and in pensions. One of the guiding principles as the legislature developed the amendment was to be much smarter about our finances, to pay off debt where we could, and to set two billion dollars aside.
They would talk about the two billion dollars blocked off in the constitution related to education going to be used to pay down teacher debt in order to make the teacher pay raise permanent. Similar principle here, we're going to use these dollars to continue what they were supposed to, which is one-time investments, whether that's an infrastructure or paying down the inventory taxes as parishes work to remove that inventory tax to bridge the gap.
Let’s jump to this school portion of this relative to teacher pay raises. What's going on there?
That same principle takes two billion dollars that's been locked up in dedicated funds over the last couple of decades and uses them to pay off local school board teacher pension debt which as you know makes up a significant portion of the total compensation that those school boards have to pay and in return for that, the law requires them to use those savings to make permanent.
The teacher pay raise has come in stipends for the last couple of years so you know this puts the decision about teacher compensation back where I believe it belongs. Uh, teachers are employees of their local school boards and local school boards are in the best position to respond to the needs of those communities. The politics of this over the last, you know, decades have been teachers and those school boards come to the state to ask them to pay for this. So this is doubly good. It pays off the debt that we need to do anyway and empowers and allows those school boards to make permanent that teacher pay raise.
So there's this forecast that the state's intention is to get out of the pay raise business with teachers altogether in the future?
I don't think that that's likely but given the politics and the desire certainly for the state to play a role in ensuring our education system improved. But I do think it helps to refocus the debate and remind voters and legislators and everybody that school boards have the power to make those decisions.
The state almost certainly will play some kind of role in the future. But this is a good debate and discussion to have at the local level as well.
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