Tim Barfield Fires Back At The Hard Left Assault On The Tax Swap

Louisiana’s Revenue Secretary Tim Barfield put out a press release in response to a mini-media blitz put on yesterday by the Institute on Tax and Economic Policy and their allies the Louisiana Budget Project.

The two organizations, whose funding sources are the same foundations who keep the lights on at outfits like Media Matters, the Center for American Progress, NOW, NARAL, La Raza, the Natural Resources Defense Council, the Sierra Club and People for the American Way – along with lots of other Hard Left Washington pressure groups, attempted a double-tap on a plan being put together by Barfield and others in Louisiana Gov. Bobby Jindal’s administration which would eliminate the state’s income tax and replace it with an increase in sales taxes.

ITEP, which puts out an annual report called “Who Pays?”, the reading of which is difficult to accomplish without violin music for the poor, and applied that purported expertise to assault the Jindal-Barfield plan (for which no bill has yet been written and no particulars have been decided upon) on class-warfare lines with some rather laughable conclusions…

Louisiana Governor Bobby Jindal has said that he supports the elimination of the state’s personal and corporate income taxes. In fiscal year 2012, Louisiana collected nearly $3 billion in revenues from its personal and corporate income taxes. In order to pay for the drastic reduction in revenue that would come from eliminating them, lawmakers would likely raise the state’s sales tax rate or broaden its base by eliminating various exemptions. Governor Jindal is reportedly developing a plan along these lines that is said to also include some type of income tax relief for low income Louisianans who will be hit hardest by shifting the tax structure to rely more heavily on revenue generated from the sales tax.

The Institute on Taxation and Economic Policy (ITEP) used its Microsimulation Tax Model to show the impact of eliminating the personal and corporate income taxes and increasing the sales tax rate to achieve overall “revenue neutrality”—a goal the Governor previously said would be part of his tax reform agenda.

The ITEP analysis does not include any low income tax relief because the mechanism for that relief is unclear at this time. However, it is worth noting that any low income tax relief will likely be insufficient to off set the impact of the large sales tax hike necessary to make this tax swap revenue neutral. (The low income tax relief will also need to be paid for which will likely mean that middle class families will see an even larger tax hike than that described below.) The overall shift in tax liability is so dramatic that the plan is virtually guaranteed to have a regressive impact regardless of whether or not a low-income relief program is added to the package.

And then ITEP produced this rather loaded chart to illustrate their assertions…

How a sales tax increase the maximum contemplated amount of which has been placed at three percent – sources inside the Revenue Department tell us that figure is close to double what’s actually being considered – could result in anyone’s tax burden increasing by 3.4 percent is a good question. Obviously ITEP is assuming that not only is a three percent sales tax hike on the way but the removal of exemptions for prescription drugs, utility bills and/or groceries are coming – which is either evidence of a complete lack of recognition both of Jindal’s stated intentions where the plan is concerned and what is passable in the Louisiana legislature, or a total disregard of same.

This bogus study was picked up, uncritically, by a host of Louisiana media outlets – particularly after it was trumpeted by Jan Moller of the Louisiana Budget Project, an outfit funded by many of the same people who fund ITEP (including the Annie E. Casey Foundation, George Soros’ Open Society Institute, the W.K. Kellogg Foundation and the Public Welfare Project), to “prove” that what Jindal and Barfield are trying to do constitutes an attack on the poor.

Louisiana Budget Project Director Jan Moller said the new figures should serve as a warning to legislators as they consider legislation that could make Louisiana’s tax structure even more tilted against the poor. “Policymakers should be looking for ways to make Louisiana’s tax structure more fair, instead of raising taxes on the middle class to finance tax cuts for the wealthy,” Moller said.

Allow me to retort, said Barfield…

It is ironic that ITEP – a liberal special interest group – launched an attack on the same day the Wall Street Journal editorialized in support of our proposal as well as other states who are seeking to eliminate income taxes. We have a fundamental philosophical disagreement with ITEP about how to help the poor and improve job opportunities for all Louisianans. Contrary to ITEP’s definition of fairness, we believe that the less money the government takes from people’s incomes, the better.

The best way to alleviate poverty is to create jobs, and the way to create jobs is by structuring a tax code that is fairer and simpler so that Louisiana can continue to foster an environment where businesses want to invest and create job opportunities for all of Louisiana’s citizens. Study after study has shown that companies move to places where taxes are lower, and job creation is the only sustainable way to combat systemic poverty.

There are progressive measures in the current tax code to help low-income groups, which we will retain in our final proposal. Sales tax exemptions are currently protected by the Louisiana Constitution and will remain so. The basic necessities of life – groceries, prescription medicine, and residential utilities – will remain sales-tax free. The proposal will also include some form of an Earned Income Tax Credit to offset any additional sales tax burden that might impact low-income Louisianans.

ITEP ignores an inconvenient truth: the states without a personal income tax – four of which are named in ITEP’s “Terrible Ten” list – helped create the most jobs in America over the last decade.

Barfield hinted at, but didn’t come out and say, that the most fallacious (and dishonest) aspect of ITEP’s analysis is the fact that eliminating income taxes is a proven pro-growth policy, and economic growth would have the effect of creating higher incomes in Louisiana – and likely population growth as well.

Both factors would serve to lower the percentage of income being spent on sales taxes, for two reasons – first, with more population growth it’s likely there would be more people buying things and thus a larger aggregate sales tax revenue base, it can be expected the sales tax rate wouldn’t need to be as high as ITEP’s projections. And second, if we’re to believe ITEP’s assertion that poor people spend far more of their income on purchases that would generate sales tax than other people do (which even if not completely dubious we think is grossly overstated) then one would surmise that a rise in incomes from the availability of better jobs a growing economy would provide might serve to make for fewer poor people and therefore alleviate the problem.

None of this, as we mentioned above, is factored into ITEP’s analysis, nor do their fellow redistributionists at the Louisiana Budget project bother to take it into consideration. Why should they? After all, economic growth is only the whole point of the proposal in the first place.

This kind of everything-but-the-kitchen-sink opposition to change on the part of the Left will only intensify. They won’t even run candidates to push their positions, and therefore offer no solutions of their own. But let Jindal propose something which has been successful pretty much everywhere else it has been tried, and before there is even a finalized bill to scrutinize the wannabe Robin Hood crowd will rush in to flood the zone with specious arguments, cooked-up numbers and Chicken Little fearmongering.

It’s predictable, it’s pathetic and Barfield is right to call it out for what it is. It’s nice to see someone atop the Revenue Department who’s willing to fight for good policy against these people rather than engage in bad policy as a destructive renegade.



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