On Cigarette And Other Taxes

Earlier today, Jim Beam posted a story on the vote yesterday to renew a four-cent tax on cigarettes in Louisiana sponsored by Rep. Harold Ritchie (D-Bogalusa). Jim is for it, and he takes a poke or two at conservatives who have opposed the tax.

Specifically, he called the tax a “no-brainer,” and Gov. Bobby Jindal’s opposition to it “irrational” and “unreasonable.”

I don’t particularly have a strong position on this bill, since it’s more or less a semantic argument whether this is a new tax or a renewal of an existing tax.

But I don’t think Jim’s argument is such a slam-dunk as he makes out.

The Alexandria Town Talk had a much different take today…

This is like being held up by some thug who then insults you as he walks off with your wallet. The only difference is that the thug wields a sharp knife while lawmakers use dull legalese.

H.B. 591, passed by the House and sent to the Senate, would “enact R.S. 47:841(G), relative to the tobacco tax; to remove termination of the applicability of a certain portion of the tax levied on cigarettes.”

See? You don’t even know you’re about to be robbed.

If approved by the Legislature and signed by Gov. Bobby Jindal, H.B. 591 would keep the state sales tax on cigarettes at 36 cents a pack. Current law says the tax will be reduced to 32 cents when a 4-cent addition enacted 10 years ago expires June 30, 2012.

Like it or not, lawmakers, voting to extend that tax increase — or any other — is the same as levying a new tax.

Precious few elected officials remember that after they start to cash checks written by the public.

Fortunately, there are exceptions — mavericks, by comparison. M.J. “Mert” Smiley Jr. is one of them.

“Whenever you renew a tax like this, it’s basically like doing a new tax,” said Rep. Smiley, R-St. Amant.

Well said. Our only quibble is with the use of “basically.” It’s not needed.

Whatever arguments were made to support the 4-cent increase in 2002 may or may not remain relevant a decade later. That needs to be vetted.

Yes, tobacco taxes may fund health campaigns, and it is conceivable but not likely that the higher tax could dissuade someone from starting to smoke.

But that is not the point today.

H.B. 591 makes the 4-cent tax bite permanent. That is a new tax and a new tax increase.

Louisiana does not need either. It also does not need public servants who do not — or choose not — to see that.

Americans For Tax Reform is also coming after the tax vote, and particularly the Republicans who approved it…

On Tuesday, the Louisiana House of Representatives voted to raise the state’s tobacco tax by passing HB 591. HB 591, which blocks the scheduled expiration of a four cent per pack cigarette tax, passed by a 70-30 margin, the bare minimum required to increase or renew any taxes in Louisiana.

Seven Louisiana legislators who signed the Taxpayer Protection Pledge, a promise to Louisiana taxpayers to “oppose and vote against any and all efforts to increase taxes,” broke their commitment to constituents by voting for HB 591. The seven representatives that broke their Pledge are as follows:

Steve Carter (H-38), Jean Doerge (H-10), Joe Harrison (H-51), Dorothy Sue Hill (H-32), Sam Jones (H-50), Anthony Ligi (H-79), and Jerome Richard (H-55).

“While it’s unfortunate that some lawmakers chose to go back on their central campaign commitment to voters, ATR applauds the nine house members who stood by their pledge to oppose job-killing tax hikes in the Pelican State,” stated Grover Norquist, President of Americans for Tax Reform. “Passing this bill goes against all of the hard work that the Louisiana legislature has done in the past three years to reduce the state’s tax burden and increase economic competitiveness.  Furthermore, it’s well documented that tobacco tax hikes are nothing more than a budget gimmick serving as a place holder for future tax increases on the general populace. Lawmakers in other states have recognized this and are moving to actually lower tobacco taxes. Proponents of HB 591 seek to take the state in the wrong direction.”

Jindal is going to veto this thing, whether it gets out of the Senate or not. So Beam and other proponents of the tax can blow all the smoke they want about why it should continue, but it doesn’t matter.

The arguments for it aren’t novel, and it’s true that cigarette taxes are the one revenue idea the voters in the state are for. Most people will tell you that with a major budget deficit Louisiana needs to fix, you can’t really cut taxes at this point. Ritchie’s plan to drive cigarette taxes through the roof went nowhere, so you can’t call this an attempt to balance the budget on the backs of cigarette smokers.

But it’s not irrational to put on the brakes and ask whether a tax which was supposed to sunset when it was originally passed should be made permanent now, when there appears to be momentum in Louisiana toward reducing tax burdens and shrinking government – at least in fits and starts.

It would have been a little more palatable if Ritchie had offered to simply extend that 4-cent tax for a few more years. At that point the argument that this isn’t a new tax would be stronger. But Ritchie is attempting to make the tax permanent. It wasn’t permanent when it was originally passed; making it permanent now is something new.

We’re essentially discussing the reverse of the argument that boiled up in Washington six months ago over the “Bush tax cuts” and whether they’d be renewed. Republicans called the failure to renew those tax rates a tax increase, while Democrats said if they were extended it would amount to a cut. Republicans won that argument, though the Bush rates weren’t made permanent. In other words, the GOP offered what Ritchie did not – an extension, rather than a sea change.

Ritchie won in the House, but it seems like stupid politics for him to have pursued a permanent increase. The seven Republicans ATR is now saying broke their no-tax pledge will be under a lot of pressure to change their vote should it come time to attempt a veto override on the bill, and it’s doubtful the override will come.

But the real tax issue at play is the attempt by Rep. Hunter Greene (R-Baton Rouge) in the House and Sen. Rob Marionneaux (D-Livonia) in the Senate to wipe out the state income tax. Jindal is standing in the way of that as well, despite the fact that there seems to be a great deal of support for it out there.

Both Greene and Marionneaux have offered interesting plans on the income tax. Yesterday, Marionneaux put on a show on top of a ladder in defense of his plan, which would phase out a host of tax exemptions in tandem with a phase-out of the income tax. It didn’t work, as his bill was recommitted to the Senate Finance Committee yesterday and it’s commonly understood it’s going to die there.

Lots of doomsday projections are made about what happens if Louisiana gets rid of the state income tax, and that’s why the Jindal administration has treated the plans to do so as unserious.

But Texas doesn’t have a state income tax, and Texas is doing a heck of a lot better than we are. And as C.B. Forgotston pointed out on WWL radio yesterday, sure – property taxes are higher in Texas. But most property tax comes out of local government action – in other words, they’re paying property taxes in Texas because voters went to the polls and agreed to this millage for schools, and that millage for a bond issue to build a boat launch down by the creek, and the other millage for some other thing.

In Louisiana, we use income taxes to pass money from the state government to the local governments – in many cases funding things the voters at the local level wouldn’t support with their own money. And that’s a big reason why our government has a bigger footprint than Texas’ does. We could have zero income taxes in Louisiana and lower property taxes than in Texas. We’d probably have a lot stronger economy, too.

This is the kind of thing the Jindal administration probably needs to reconsider its stance on. The repeal of the income tax has now come up twice since 2008, and it gets a good deal of support every time it comes up. After this fall’s elections, when Tea Party types pick off several Republicans as well as Democrats and move both houses of the Legislature to the right, there will be even more momentum to kill off the income tax. And by not embracing it, Jindal isn’t making himself look reasonable; he’s making himself look timid and myopic.

Given the fact that Jindal has no credible challenger on the left, he has no downside to embrace a repeal of the state income tax and then present the legislature with a drastic transformation of state government – moving power and responsibility down to the local level, killing off state programs of dubious value or those which are duplicative, and so on. Jindal’s pitch would be “OK guys, you want to kill the income tax and so do I. Here’s how we can make this work.”

One can only conclude Jindal isn’t interested in transforming how government is done here; he just wants to nibble at the edges and make what we have work better. And that might be a valid argument – though the voters who were hoping for real conservative governance from Jindal and so far have only gotten it in fits and starts probably deserve for him to make it publicly.

In general, though, we can expect that nobody’s taxes will go down in Louisiana this year. Some folks accessing government services will pay more – those paying college tuition, for example. And spending will be cut in some form or fashion, though it’s impossible to see how that’s going to look based on the budget chaos going on in the House of Representatives now. And maybe that’s as it should be given the current circumstances.

But it would have been nice, instead of budget free-for-alls and possible economically beneficial changes to the state’s tax structure being shot down from the Fourth Floor, if our state’s leaders had approached a $1.6 billion deficit as a signal the way business is done in Louisiana is structurally unsound and endeavored to rebuild state government on a leaner, more competitive model. And that, four-cent cigarette tax sunsetting or not, isn’t happening regardless of what the voters want in an election year.



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