Jindal Releases 2016 Budget; Looks Like An Effective $377 Million Business Tax Increase

There’s a lot to go through here, so it’s going to be difficult to have a comprehensive reaction until Monday, but it looks as though the Jindal administration is seeking to close about $1.2 billion of the state’s $1.6 billion budget surplus through what it calls budget cuts.

And the largest share – $526 million – of that $1.2 billion comes from the elimination of refundable tax credits, which are tax credits which can result in the state paying taxpayers more in credits than those taxpayers are incurring in tax liability.

For example, let’s say your company owes $1,000 in taxes, but you’re eligible for $1,100 in tax credits due to some specific business activity you engage in that the state has expressed a willingness to promote. That tax credit being refundable means you can get a check from the state for $100.

The most significant example of this in practice in Louisiana is the business inventory tax credit – through which some $377 million is currently being sent back to the business community. That means the state is paying businesses $377 million to do business in Louisiana, but they’re not exactly pocketing that money – what’s actually happening is that $377 million is paying property taxes to local governments, whose assessors generally hammer businesses carrying inventory. That’s what a $75,000 homestead exemption does; businesses pay a monstrous share of the property taxes, and because that system makes Louisiana exceptionally uncompetitive with other Southern states the Legislature decided to cover those costs by issuing a refundable tax credit that basically amounts to a state subsidy to local governments to keep them from soaking business.

In Texas, there is a lot of talk about doing away with their inventory tax altogether. Alabama and Kentucky don’t even have inventory taxes at the state level. In all of those places they don’t have homestead exemptions even remotely close to what Louisiana has, and therefore businesses don’t bear the overwhelming burden of local property taxes. LABI is trying to wipe out inventory taxes in this session. And Jindal now wants to effectively raise $377 million in taxes on business by eliminating the refundable component of the tax credit.

Which will, interestingly, put Jindal at war with Stephen Waguespack, his former chief of staff who’s now the president of LABI.

“It is going to tremendously increase taxes. We can say that it isn’t, but it certainly is,” Waguespack told the Times-Picayune when asked about the change.

Jindal can make the argument that he’s not responsible for local governments beating the crap out of business, and with a deficit such as this one is he simply can’t afford to keep bailing business out from what the locals are doing to them. And that’s not an indefensible position; on one level he’s right that the way Louisiana has been doing this stuff is completely idiotic and unsustainable; we’ve been covering a bad tax code with a bunch of tax credits in order to stay competitive with places who don’t have bad tax codes.

But the bottom line is he’s adding $377 million to the tax burden of companies who have warehouses full of merchandise or lots of equipment. And doing that will mean $377 million less capital available to hire people. How much of the $60-100 billion in new capital investment slated for Louisiana would be threatened by this change is a question.

And Jindal’s carefully-crafted reputation for refusing any tax increases? Well, that’s gone.

Also in the budget is a cigarette tax increase which is supposedly going to reimburse parents who’ll be paying higher fees at colleges which are going to lose funding from the state general fund. He’s cutting $141 million from higher ed, though he’ll mitigate that by increasing the TOPS budget by $34 million which would mean that should tuition rise at some schools to offset the budget cuts TOPS would cover that. Just moving money around.

Still, Jindal is boasting he’ll be cutting the state payroll down to the lowest head count in a quarter-century, by laying off 68 state employees and not hiring 659 people for jobs currently open in state government…

With the elimination of 727 additional positions in the upcoming year, we now have the smallest number of state government employees in 25 years. Based on figures from the Department of State Civil Service, between December 31, 2007 and December 31, 2014:

  • The total “head count” of all employees in the executive branch of state government has decreased from 100,677 to 70,263, a reduction of 30,414, or 30.2 percent.

  • In terms of full-time employees (or FTEs), the total has fallen from 93,554 to 62,384, a reduction of 31,170, or 33.3 percent.

  • As a result of the reduction in the number of state employees, the overall state payroll has been reduced by a total of more than $828 million – from $4.154 billion to $3.326 billion.

In previous budget fights Jindal has been able to claim he’s the most conservative actor on the stage, and to assail the “fiscal hawks” for their willingness to embrace tax increases. Now he’s espousing some of the same things he derided his opponents for.

And his $24.6 billion state budget proposal doesn’t appear to make any structural changes to state government.

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