State Rep. Steve Scalise puts the Stelly Plan in the bull’s eye.

From: New Orleans CityBusiness

METAIRIE - There’s a $1.2-billion surplus sitting in state coffers, and that doesn’t sit well with state Rep. Steve Scalise.

The Metairie Republican hopes to give the surplus back to taxpayers after the regular session of the Legislature begins Monday.

He and other lawmakers want to repeal aspects of the Stelly Plan.

Lawmakers approved the tax swap in 2002 and voters OK’d a constitutional amendment to permanently exempt purchases of food and prescriptions and home utility bills from state sales taxes. To make up for the lost revenue, the plan increased state personal income tax collections.

Louisiana residents now cannot deduct charitable contributions, home mortgage interest or insurance deductibles on state income tax returns.
Scalise wants to allow those deductions again.

“We’ve been losing the middle class,” Scalise said.

Greg Albrecht, chief economist for the Legislature, said Scalise’s bill would affect about 20 percent of tax filers.

In Louisiana, 80 percent of taxpayers do not have enough excess deductions to itemize, he said.

The federal government allows couples filing jointly about $10,300 as a standard deduction on their income tax return. If deductions total more than that amount, the taxpayer can itemize.

Mortgage interest payments are the main reason most taxpayers itemize but most homeowners don’t have more than $10,300 in annual mortgage interest, said Albrecht.

Just before the Stelly Plan passed, the state capped excess itemized deductions at 50 percent, Albrecht said.

For example, if a taxpayer claimed a federal deduction $500 above the standard amount, he could claim only $250 on his state return before the Stelly Plan was enacted.

Scalise’s bill would allow tax filers to receive 100 percent of excess itemized deductions.

“I think about two years before the Stelly Plan, excess itemized was at 100 percent,” Scalise said. “It wasn’t that long before Stelly that it was a full 100 percent. I’m not trying to do something that’s never been done before.

“The bottom line is we’ve got this large surplus and I’ve been trying to do as much as I can to give that money back to people.”

Gov. Kathleen Babineaux Blanco said she is against any changes to the Stelly Plan.

“The Stelly Plan is operating as it was designed to do,” Blanco said. “While I recognize the political ease in granting tax cuts, I would urge fiscal restraint and a thoughtful review of this entire matter.”

The Louisiana Association of United Ways backs Scalise’s bill since it restores the tax exemption for charitable donations.

“We certainly saw this as opportunity for people to feel like it would be easier to make that investment,” said Charmaine Caccioppi, state United Way president.

It’s not the first time Scalise has tried to repeal aspects of the Stelly Plan. An opponent of former Rep. Vic Stelly’s tax reform from its conception, Scalise’s prior attempts have failed in legislative committees.

This time, if the bill stalls in committee, a lobbying war may be waged to bring the matter to the House floor, Scalise said.

“I think this year is the best chance we’ll have to get this bill passed,” he said.

Scalise’s bill does not affect other aspects of the Stelly Plan, such as changes to income tax brackets. The bill also would not change the Stelly Plan’s elimination of the state’s 4-cent sales tax on food for home consumption and on natural gas, electricity and water for residential use.