SADOW: Jindal’s Tactical Retreat

Gov. Bobby Jindal’s address to the start of the 2013 Regular Session of the Louisiana Legislature demonstrated he knows when to fold them and still come out a likely winner.

Quickly mentioning a few other past policy initiatives enacted connected to economic development, Jindal spent almost all his speech discussing the desirability of the elimination of income taxes as a means for continued success in this area. He then declared that he was pulling his tax swap plan, basically no income taxes in exchange for higher and expanded state sales taxes and some exceptions elimination, in favor of anything that would eliminate income taxes. The plan had come under fire from a number of quarters as its complexity served more to stoke fears than support.

Several bills already introduced would work to eliminate income taxation, although none immediately, while other look to get rid of exemptions, and one even wishes to institute a statewide property tax dedicated to higher education funding. Cleverly, Jindal now has removed his chin from leading this effort and has set himself up as arbiter with more input than anybody else in whatever product manifests. And in accepting this task, the Legislature leaves fewer resources available to pursue more mischievous ends according to Jindal, such as challenges to his budgeting.

While his specific package went down as a tactical defeat, this new strategy promises to win the war. Three months ago, the policy conversation included nothing about income tax elimination, which in his first successful run for office Jindal said he would try to accomplish. But as he and surrogates stumped for his plan, it became clear that those efforts have created an environment where the question has become not if, but when and how income tax disappearance will occur.

It’s also clear he will assume this role by his aggressive defense of the basic idea of its abolishment, and in particularly striking language he used in regards to the exemptions. If there’s been one area in which he has deviated the most away from principled conservatism and more towards crony capitalism, it has been in his support of special programs that enriched certain industry interests or in funds that took on forms of bribes to get businesses to relocate in the state. But when he lamented that “business” got more exempted than paid in last year and lambasted the fact of 468 exemptions and asserted that some of them were there to benefit “special interests” – a phrase seldom heard from him since the very earliest days of his administration with ethics reforms – this kind of populist language not often coming from him signaled he now seems willing to roll back these kinds of programs (with one industry, petroleum, already indicating willingness to have half of its breaks end in exchange for the income tax erasure).

Whether the grand goal of no more income taxation can be achieved remains in doubt. There’s a lot of revenue there – the latest Revenue Estimating Conference pegs the amount to be derived at $3 billion or 37 percent of all general fund revenues – that exemptions of a statutory nature cannot possibly cover, those totaling (including the half already agreed to by the petroleum industry) about $1 billion, and eliminating lucrative and wasteful tax credits like the film or solar kind won’t come near to making up the rest. A flat tax of 2 percent on income with other changes may be the best he can hope for.

But if this is what gets presented to him in final bill form, he certainly would not veto it to hold out for no income tax. Instead, he can claim he wanted to go farther but would sign it as a good start. Victory could be declared yet the “impatience” he spoke of as part of him that has he says has fueled his quest for reform (even if that trait didn’t seem very evident to observers throughout most of his first term, where he acted cautiously) could continue to finish the job. While it’s more of a legacy (and perhaps a high profile campaign talking point) to speak of being the guy who got rid of the income tax, being the dude that made it flat and low isn’t so bad.

Jindal’s particular vision of a tax swap featuring the end of income taxation that doesn’t increase individual burdens will not come to pass. Yet his quest to transform the state’s fiscal structure into something like it looks more certain now to succeed and underscores that this all along has been his most cherished objective.

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