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Nothing cutesy about it
Every Louisiana taxpayer would love to get some financial relief.
Prices for everything from insurance to gasoline to rice are up, and taxes eat up a sizable chunk of everybody's pay check. Tens of thousands of South Louisianians have the added burden of the debt they took on to replace their cars, their homes and everything else that was ruined by wind or flood in Hurricanes Katrina and Rita.
But as the state Legislature debates massive tax cuts, lawmakers need to be rational.
What started as legislation to roll back the 2002 Stelly plan income tax increases was amended to phase out the income tax altogether. That amendment to Senate Bill 87 might have been meant as a way to kill the measure, but the revised bill passed the Senate unanimously. The House Ways and Means Committee is expected to vote on it Monday.
The income tax makes up roughly one-third of state revenues. If the phase-out were to pass, it would ultimately reduce revenues by $4 billion per year when fully implemented in 2017. Even the return to pre-Stelly tax rates, as Senate Bill 87 initially proposed, would cost the state roughly $300 million per year -- which is still a substantial amount.
The Jindal administration opposed the bill in its original form, although the governor has said he will sign a tax cut if it is offset by corresponding spending cuts. Surely he doesn't want to deal with the elimination of the income tax, though. He has grand plans for Louisiana, and it will be difficult to achieve them without a major source of revenue.
There no doubt is fat in the state budget. You don't have to watch the Legislature at work for long to figure that out.
But making cuts is complicated because lawmakers and voters have given so many agencies and programs constitutional protection.
A large portion of the budget has restrictions on when spending can be reduced. Public schools can't be trimmed more than 1 percent annually -- and then only if budget projections drop a certain amount and classrooms aren't affected. Up to 5 percent can be cut from other protected programs during a budget crunch. There were even fewer options before voters agreed in 2002 to loosen the reins.
This generally has meant that health care and higher education have taken the brunt of budget cuts when revenues were short because their money isn't locked in by the Constitution. These aren't tight times, but those would be the easiest places to cut now as well.
Ironically, the Legislature last year fully funded the formula for higher education for the first time since the early 1980s. The landmark move was hailed as progress in the state's effort to elevate universities to a higher level and attract more research dollars and better staff, which would in turn benefit the economy.
Does this group of lawmakers want to immediately reverse that achievement? Do they want to cut the cost of TOPS by making its entrance requirements more rigorous or providing the awards based on financial need?
Do they have the fortitude to take a hard look at the Constitution and push for more flexibility? That could really produce results, but it isn't likely to happen.
Lawmakers' discussion of Senate Bill 87 so far has been pretty superficial. Either they don't understand the complexity of the issue, or they don't want to deal with it.
When legislators argue that Louisiana is rolling in dough because of skyrocketing oil prices, they don't mention the Oil Bust of the 1980s. At its peak, oil and gas revenue provided 35 percent of the state budget -- roughly the same portion the income tax provides now. When the oil and gas industry crashed, it sent shock waves through the budget -- and that would happen again if legislators do away with the income tax.
When some lawmakers rail against the Stelly plan, they rarely mention that it eliminated a state sales tax that was supposed to be a temporary fix for the Oil Bust but lasted 16 years. They argue that the Stelly tax changes were supposed to be revenue neutral, but that's selective amnesia. Then-Rep. Vic Stelly consistently said the tax swap would be revenue neutral initially but not for long because income taxes are a growth tax. As salaries rise, so do tax collections.
Rep. Stelly acknowledged that his plan might need to be tweaked over time, but legislators should remember that income taxes are fairer than sales taxes, which put a heavier burden on lower-income residents.
Giving taxpayers some relief is a fine idea. But the Legislature needs to discuss cuts in a realistic and responsible way.
That hasn't been the case this time. Sen. Joe McPherson ended up apologizing to his colleagues for voting to pass the amendment to eliminate the income tax. He said he cast his vote thinking that the amendment would fail. "I wanted to be on the record as doing away with income taxes," he said. He admitted that he was trying to be "cutesy" with his vote.
Deciding how much to cut taxes and which services to reduce or enhance is serious business.
There's nothing cutesy about it. |
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