On the subject of his proposal to make the state’s inventory tax credit non-refundable, which we explained was an effective tax increase here and Stephen Waguespack greatly expanded upon here, the Jindal administration has decided to dig in its heels and make an egregiously ludicrous defense of its budget plan.
“This policy does not raise taxes. In fact, companies and individuals affected by this policy change will still pay zero in state income tax. Our proposal just reduces the taxpayer dollars our government pays out above and beyond a company’s state tax liability,” Jindal spokesman Mike Reed said in a statement Tuesday.
Technically, what Reed said is true – if what he was trying to say (assuming he’s quoted correctly) is that the companies involved are spared paying state inventory tax rather than income tax, which is something totally separate from this discussion. But as a matter of reality you really couldn’t tell a more pants-on-fire lie than this.
The point of the refundable tax credit is to protect companies doing business in Louisiana from getting slaughtered by local governments anxious to feast on them. It was instituted in 1991, after Louisiana’s private sector had largely been picked clean by other states with more advantageous tax systems, in an effort to preserve what was left.
It could have been defended by saying that the state no longer has the money to subsidize irresponsible and uncompetitive tax policies by local governments satisfied to soak business with inventory taxes knowing that those companies won’t really pay those taxes, and that it was time to end that round-robin.
Except had the Jindal administration made such a statement it would have been an argument for Waguespack’s idea to get rid of the inventory tax and the credit altogether, not to eliminate the refundable portion of the credit.
Which they didn’t do, to their detriment. They would have had a stronger argument – and one which is grounded both in fiscal and economic conservatism as well as a spirit of reform and simplicity – had they been singing from the same hymnal as Waguespack and Sen. Robert Adley and Rep. Alan Seabaugh, both of whom have bills filed for the upcoming session to kill the inventory tax. Jindal would then be engaging in one final legislative battle as governor for tax reform, a stronger business climate and smaller government.
It’s amazing how sloppy and insular the administration has been in putting forth their budget. They had to know the proposal was going to get ripped to shreds by LABI and the other business groups, which have more than enough stroke in a Republican legislature to beat back an effective $377 million tax increase in an election year, and when they’re raked over the coals for that they double down and attempt to claim these are fatcats looking for corporate welfare.
Really? Here’s an example of your fatcats, from a December Advocate piece screaming about how terrible the tax credit is for the state budget…
That includes people like Cliff Boulden, for instance, who was surprised to learn from an Advocate reporter that he has been paying a few thousand dollars in inventory taxes every year for his Bet-R-grocery.
His accountant, Marvin Owens, explained to him that every year, he sends a check to East Baton Rouge Parish and then gets reimbursed by the state.
The whole process takes only a few minutes.
“I never understood why it’s there,” Owens said.
Grocery stores carry lots of inventory. So do other retailers. Car dealers are especially vulnerable. Yes, the petrochemical plants are major players in this, but most of the affected parties aren’t Exxon – they’re small businesses who would have to jettison employees if they all of a sudden started getting hit with thousands of dollars in tax increases.
And for Jindal’s people to act like there are no private-sector economic consequences to this is really indefensible. It virtually ensures Jindal is going to leave office with almost no friends on the state political scene.
Want proof? Jindal’s “guy” in the upcoming election to replace him is Scott Angelle, right? Well, here’s what Angelle thinks of his budget…
“Clearly it’s time for the state to seriously address its budgeting challenges. The reality is government has grown substantially over the last decade, and now we are feeling the pains as it shrinks back down to a reasonable size that the taxpayers can afford to support. The real problem is not the need for more revenue. It’s that we are relying on an outdated, failed system of taxation and budgeting. On the one hand, Louisiana has a messy and complicated tax code. The incentives, credits and rebates were intended to fix that in a piecemeal and unsustainable fashion. On the other side of the balance sheet, the state has locked down what tax revenues are available for so many specific purposes that critical services like healthcare and higher education are all that are left on the chopping block.
As governor, I will immediately work toward reforms to enact a fair, transparent, competitive tax code and to allow state leaders to create a balanced, sustainable budget that reflects the priorities of the people of Louisiana. Attempting to address this year’s budget deficit with dramatic cuts to critical services and substantial tax increases on job creators is a stop-gap approach that will harm Louisiana’s national reputation and quality of life in the short and in the long-term. We can all agree that there is a structural budget problem in Louisiana when we have our highest state gross domestic product and our highest numbers of non-farm jobs in our history yet still have a $1.6 billion deficit. It’s high time we make the tough decisions and get the state budget in the right place so our children aren’t facing these same challenges ten and twenty years down the road.”
That second paragraph is a little stronger than your typical campaign hedge. It’s a signal that (1) Jindal doesn’t have a whole of of support even among the political hopefuls associated with his faction and (2) he’s not winning the argument on the merits of his budget proposal.
Digging in behind it is a political disaster in the making. It’s going to make the attempt to kill the state income tax, which differed from this idea in that it was at least salutary in principle, look like a rousing success.