Jindal agrees to compromise on bill
By MICHELLE MILLHOLLON
Advocate Capitol News Bureau
Published: May 15, 2008 - Page: 1A - UPDATED: 12:05 a.m.

With Gov. Bobby Jindal’s backing, a House committee advanced legislation Wednesday that would reduce state taxes by $300 million a year.

The House Committee on Ways and Means stripped an amendment from Senate Bill 87 that would gradually eliminate the state personal income tax.

Several lawmakers said they wanted to at least let the full House debate that proposal.

However, state Sen. Buddy Shaw said Jindal agreed to sign a $300 million tax break — not a bill that gradually gets rid of individual income taxes, which generate nearly $4 billion per year.

“Right now, we can have a red letter day and we can make a whole lot of people appreciative,” said Shaw, R-Shreveport and SB87 sponsor.

Shaw said the bill will particularly give tax relief to the middle class.

The maximum tax cut would be $500 for single tax filers and $1,000 for married tax filers.

SB87 would restore the income taxes that the so-called Stelly plan increased.

Stelly, named for Vic Stelly, the former Lake Charles legislator who drew up the measure, swapped higher state income taxes for lower state sales taxes.

For example, in East Baton Rouge Parish, the swap removed taxes on utilities for residential customers and reduced taxes on groceries.

In a telephone interview, Stelly said he is “very happy” that lawmakers did not try to put the state sales tax back on groceries.

He said the plan always was to revisit the income tax increases if state revenue allowed it.

SB87 also would not change the income tax that the Stelly plan lowered. Under Stelly, the first $12,500 of income is taxed at 2 percent for singles instead of the first $10,000.

For individual filers, the Stelly brackets are:

• Income up to $12,500 is taxed at 2 percent.
• Income from $12,500 to $25,000 is taxed at 4 percent.
• Income over $25,000 is taxed at 6 percent.

The thresholds are doubled for joint filers.

SB87 would tax individual income between $12,500 and $50,000 at 4 percent.

State Rep. Joel Robideaux, No Party-Lafayette, said an additional $25,000 in income would be taxed at 4 percent instead of 6 percent.

The savings will be a significant amount of money, he said.

Jindal initially refused to back the bill.

The legislation — which the Senate turned into an elimination of the state income tax — quickly picked up momentum, especially after an additional $824 million over two financial years was recognized for state government. The Jindal administration and the legislative leadership pulled Shaw into a huddle to talk about a compromise.

The compromise announced Wednesday in a hastily called news conference was to return the bill to its original form with the tax break going into effect on Jan. 1, instead of sooner.

Jindal said he wanted to delay when the bill took effect to avoid having to use one-time dollars for expenses that will have to be paid year after year in the $30 billion proposed state operating budget for the spending year that begins July 1.

The governor said taxpayers would start seeing increased paychecks in January.

State Revenue Secretary Cynthia Bridges cast that claim into doubt when she told the Ways and Means Committee later Wednesday afternoon that she did not plan to make changes that quickly to the state withholding tables.

Changing the tables would alert businesses to change the amount of money they withhold from paychecks.

After the committee meeting, the Governor’s Office insisted paychecks still would increase in January.

It would be wrong to state that taxpayers would not get savings until they file their income tax returns in 2010, said the governor’s press secretary, Melissa Sellers.

Bridges later said she evaluated the situation and decided to change the tables.

She said she did not know what impact that would have on the upcoming fiscal year although she agreed that it would affect the latter part of the budget year.

“We’ll try to get the word out, but it’s going to be up to the businesses,” Bridges said.

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