GNO Inc President and CEO Michael Hecht joined Newell for his usual weekly interview Wednesday morning to discuss the state of the regional economy as federal monies start coming down the pike to provide much needed relief to Louisiana families and businesses.
“Michael, there is so much going on around this country and around the state, but let’s start with the legislature, now in session,” Newell began. “What do we expect to see happen there? A number of tax reform bills have made it through the first committee already.”
“I think that's what's most optimistic about what's happening in the session, there is a real appetite for tax reform and it seems to be bicameral and bipartisan. The governor has come out and said that as long as it's revenue neutral, then he supports these things in concept. The one that we are most excited about is a piece of legislation by Senate FISC chairman Bret Allain. And this is one that would get rid of federal deductibility. We're one of only two states in the entire country where you are able to deduct your federal liability from your taxable liability at the state level, but in exchange for that, it would lower our income tax rate in a revenue neutral way. And so this has a bunch of benefits. It makes us look better. It removes volatility because we're not tied to taxes in DC anymore, that’s kind of a regressive incentive because it tends to be only wealthier people that are actually getting the benefit. And so that came out of a committee yesterday, unanimously, and it's going to be going to the Senate floor this afternoon, I believe. We're optimistic about that!”
“Does this bill identify where the rate will ultimately end up being?”
“I believe that this one identifies the top rate as coming down from 6% to 5%. I'd like to see it a little bit lower, but it's going in the right direction. I mean, look, ultimately Newell, I'd like to see us get to zero, because you look at what's happening in Texas and Tennessee and Florida and the U-Haul numbers speak for themselves. People are moving to those states! but I believe that 5% is the rate that's indicated in the bill.”
“I know there was a lot of chatter around a 3% number, and I've noticed probably 5, maybe as many as 10 different bills trying to identify what the number is actually going to be,” Newell said.
“We've done some back-of-the-envelope calculations here that said you can get to revenue neutral at 3.75%. So I need to actually dig in and see what that 5% that I'm reading on my notes here is about. One thing about this new world, people have to realize that we can pass it to the legislature, it's a constitutional deal. So it still has to go to a vote of the people in the fall, and I think that's actually going to be a much harder lift than in the legislature.”
“I think it certainly would be if it goes from six to five!” Newell laughed. “I mean, human nature is that you vote your own best self-interest. I would be inclined to vote against it at a 1% gain to give up the deduction.”
“I think what's going to have to happen here is that you've got to have revenue neutrality at two levels,” Hecht said. ”You've got to have it at the state treasury level, but also individuals within some reasonable bounds, like 10% have to see that their own tax rate is not going to change significantly. And so if this ends up being a net loss to enough voters, it clearly is not going to pass in the fall. You're exactly right.”
“We are fast approaching hurricane season and I almost hate to even have those words come across my lips,” Newell continued. “There always seems to be something that's not resolved relative to the National Flood Insurance Program... where are we with the NFIP?”
“So there's like two issues here. NFIP released Risk Rating 2.0 information at the beginning of the month, which is the new way that they are evaluating properties. And then today House financial services in DC is going to be taking up long-term reauthorization of the NFIP program. The committee is chaired by Representative Maxine Waters who actually was the one that Biggert-Waters was named after back in 2012 that we had then go and fix. Her bill right now would reauthorize for up to five years, which would be nice, because I think we've had like 15 or 16 short-term extensions since 2017, which is kind of ridiculous. Most significantly it would change the current legislation - right now your rate increases in NFIP are capped at 18%. In reality, they've actually much lower than that, but that is the limit. This would cut that in half and bring it down to a 9% maximum annual increase, which would be very, very nice. So we're going to be watching that and digging into Risk 2.0 and looking for folks who are interested in this because they're worried about their flood insurance bill.”
Hear the entire interview in the audio player below.
