HITHER AND YON: The Feds Squeeze $500 Million Out For Louisiana Flood Relief

There was never really any doubt Congress was going to sign off on the $500 million “down payment” for flood relief in South Louisiana. That appropriation was agreed on by all parties, including the president.

What was in doubt was when the money would come through. Yesterday, though, that issue was resolved – and the state will have its first batch of disaster recovery funding rolling in shortly…

The House overwhelmingly passed a temporary spending bill Wednesday evening (Sept. 28) to avoid a government shutdown and put aside $500 million for flood-ravaged states.

Louisiana, stricken in August by unprecedented flooding that killed 13 people, stands to receive the lion’s share of that money, officials said.

House Majority Whip Steve Scalise, R-Jefferson, said Wednesday afternoon that he had utmost confidence the bill, known as a continuing resolution, would pass the lower chamber. It did with a vote of 342-85, and now heads to President Barack Obama’s desk. The Louisiana delegation supported the measure.

The bill also includes $1.1 billion to combat the Zika virus.

Political roadblocks were cleared Wednesday to let the Senate vote 72-26 to send the bill to the House. Senate Democrats had balked at passing the flood relief package without also assuring there would be an aid package for Flint, Mich., suffering from lead-contaminated drinking water.

The compromise was to promise spending for Flint in an unrelated water infrastructure bill whose final form will be negotiated after the Nov. 8 election.

The inability to pass things on a simple up-or-down vote without there being leverage and negotiation tactics and huge amounts of pork is the number one reason why Congress is so distrusted.

Democrats in the Senate held up Louisiana flood relief over funding for the Flint water supply – which is an entirely different debate altogether and, other than the bilious ambit of “disaster” funding there is no relationship between the two. Those tactics are clearly illegitimate.

But that’s not a particular indictment of Democrats in the Senate. Both sides play this game; if somebody wants something done they have to accede to the demands of 99, or 434, grasping children sharing space in the chamber or the cloakroom. Forget about whether it’s a good idea.

In Louisiana, in one of the rare cases where this state does things better than Congress, you cannot attach an amendment to a bill which doesn’t satisfy the requirement of germaneness. In other words, you can’t hold up a bill dealing with funding for Planned Parenthood, let’s say, over an amendment which would provide funds for stocking the Toledo Bend Reservoir with alligator gar. That requirement of germaneness improves the quality of debate in the legislature – and that’s a very good thing.

There have been moves made to impose a requirement of germaneness to amendments in Congress; the most recent one is an effort by Rep. Mia Love (R-Utah). It’s unlikely that will get anywhere, but if it ever could become a rule in the House or Senate the debate in DC would greatly benefit; there would be much less tacking-on of pet projects or poison pills, or the buying of votes.

Would that likely make it harder to pass things? Probably. Why is that a bad idea? We have more federal laws on the books than we’ll ever need.

When the next tranche of flood aid for South Louisiana comes up for debate in Washington, you can bet the horsetrading will be a disgusting spectacle. The Hurricane Sandy aid package skyrocketed from some $18 billion to over $50 billion once everyone got their cut, and when several members of the Louisiana delegation – who knew something about the corruption that comes out of disaster funding and weren’t all that happy about the waste – objected, they were later pilloried as objecting to helping out people in New Jersey and New York. Which was written up in the press as a reason not to support Louisiana’s recovery.

Get ready, because you’re going to see this horror show play out in the lame-duck session after the election. $2 billion in flood aid will become $10 billion, and the things which are tacked onto that bill will have nothing whatsoever to do with South Louisiana.

It might not be obvious that Louisiana’s economy is headed down the tubes, or it might be apparent that we’re already there, depending on your perspective. One thing seems certain, though, which is that the state’s government has absolutely no clue how to provide an environment suitable to economic growth.

Two items indicate this conclusion. First, yesterday it emerged that Louisiana has plummeted to 41st in the Tax Foundation’s annual rankings of tax climates…

Louisiana continues to slide in the Tax Foundation’s annual “State Business Tax Climate Index,” with the latest ranking placing the state at 41st overall, four spots below last year’s ranking of 37, for having one of the least competitive tax codes in the nation.

In the latest index released today, the Washington, D.C.-based nonprofit also ranks Louisiana worst in the nation for its sales tax—a distinction the state has held for years.

“Louisiana has had a difficult year on tax issues,” says Scott Drenkard, the Tax Foundation’s director of state projects. “An increase in the sales tax to the highest rate in the country, plus continuing struggles with a complex local sales tax system put Louisiana in the bottom 10 states for tax competitiveness.”

The Tax Foundation’s annual index measures how well a state’s tax code is structured. The foundation analyzes variables in five categories: corporate, individual income, sales, property and unemployment insurance.

A state’s ranking can rise or fall on the list based on reforms implemented in other states or due to its own actions, the foundation says. States are rewarded for transparency and neutral tax codes, and penalized for having tax codes that are burdensome, complex and economically harmful.

In the latest index, Louisiana also tumbled four spots in the unemployment insurance category, from No. 5 in 2015 to No. 9 this year. The state also fell in the property tax category, slipping two spots from No. 28 in 2015 to No. 30 this year.

Drenkard said that it’s important for Louisiana to engage in tax reform sooner rather than later to do something about the complicated mishmash that is our tax system. And toward that end there is a state budget task force which has for months been attempting to wrestle with the idea of restructuring how the state does its fiscal business.

But the results so far don’t sound overly promising

As of Wednesday, the task force had agreed on only a few of what’s expected to be a massive change in the state’s tax code.

The group recommends reducing the state’s five-cent sales tax to four-cents. But they will need to tax services previously untaxed, such as for debt collections, cable television, residential repairs, to make up for the lost revenues, Robinson said.

The Legislature earlier this year had agreed to a temporary sales tax hike – from 4 percent to 5 percent – to plug the nearly $2 billion hole in the state budget. But it’s set to expire in 2018, leaving an estimated $1.5 billion gap.

They’ve also agreed on doing away with a deduction taxpayers can take on their state income tax returns for the amount of taxes owed the federal government.

But all sorts of the other issues are still floating.

They haven’t, for instance, decided on how to handle property taxes that often are refunded manufacturers and homeowners through credits like the homestead exemption and the industrial tax exemption.

They approved a resolution finding the state franchise tax was bad for business and that it should be either rewritten or reduced or phased out.

Tax Force member Jason DeCuir pointed out that tax experts consider the charge damaging. “If you lower a bad tax, it still has all the bad elements,” said the former Revenue Department official during the Jindal administration who now is in private business.

Task Force member Robert Scott, who heads the Public Affairs Research Council of Louisiana, said only 16 states have a franchise tax, which is based on assets held, and five states have or are in the process of phasing them out.

Experts and the business community have long complained about the complexity of Louisiana’s taxes.

And the system that includes almost 200 exemptions fails to raise enough money to cover the promises the state has made, leading to huge deficits year after year.

DeCuir has it exactly right. They’re playing around with what rates they should be charging on some of these taxes when what needs to happen is to eliminate them altogether. It’s not that Louisiana is a high-tax state per se, it’s that Louisiana’s tax system is ridiculously overcomplicated. And it’s ridiculously overcomplicated because the legislature has for decades avoided its responsibility to build a competitive tax code and instead masked its failure by giving exemptions here and tax breaks there to favor this lobby group or that.

Rather than have a corporate income tax that nobody pays because their accountants and lawyers can find them a credit or an exemption, just get rid of the tax altogether and let people know you can start a small business in Louisiana without having to process a major tax burden.

Then there are the billions of dollars that state government doles out to local governments in Louisiana, a governing strategy which promotes waste, fraud and cronyism both at the state and local levels. This is necessitated by a wholly out-of-whack $75,000 homestead exemption on property taxes statewide; nobody else does that. And because Louisiana has that homestead exemption most of the local governments are hamstrung in terms of their tax base. Other than the most populous parishes, where home values are typically high enough to generate some reasonably decent amounts of property taxes, the local governments have to sock it to businesses and the few wealthy homeowners (or landowners) who reside there. That doesn’t generate enough revenue to fund schools, police and the other priority functions, so they go begging to the state.

And the state responds by spending a half-billion dollars a year refunding businesses who get drilled with an inventory tax nobody else in America levies like Louisiana does. Or $3.5 billion per year in the Minimum Foundation Program, which shovels cash to local school boards. And supplemental pay for cops and firemen. And on and on. Politically, some of this stuff would seem untouchable, but it’s all stupid. Why should taxpayers in St. Tammany Parish be forced to subsidize sheriff’s deputies or an elementary school in Webster Parish? Why should taxpayers in Calcasieu be paying the inventory tax the Phillips 66 refinery in Plaquemines is being charged?

You want to fix Louisiana’s tax code? Here’s what you do. Wind down most or all of those transfer programs from the state capitol to local governments, and let the locals set whatever homestead exemption they want. In some places, like Jefferson and Bossier, it might actually go up. In others, like Tensas and East Carroll, it will come way down. We’ll then go back to first principles; namely, that local government functions are paid for by local taxpayers and the people charged with providing those services will have to provide them with the least cost or tax burden possible – or else they’ll pay the price of having the taxpayers hit the road to the parish next door who does a better job.

Having the state as the locals’ Big Brother who makes everything better has been the standard since Huey Long came on the scene, and it has never worked. They’re trying to maintain that system because it’s too politically painful otherwise, and all you see as a result is failure.

As an aside, this Hither And Yon comes on Thursday, three days late, because of the Mexican invasion. Your author’s condo complex is a construction zone at present; the homeowner’s association decided we couldn’t stand the siding on the buildings anymore and we’re updating it. But home construction means tons of Mexican workers – no, that’s not racist, it’s just reality – and they’re here. This week they’re working on the building we call Castle MacAoidh, and there’s a great deal of hammering and sawing. In fact, they’ve set up the little production plant to saw the new siding boards into the right size and shape four feet from the back door of the castle keep, and the circular saws start at 7:00 and don’t quit until 5:30.

The toll this takes on productivity, and sanity, is steep. And moving the Hayride’s production to a nearby coffee shop or library has proven less than an improvement. I can’t concentrate worth a flip this week, so this edition of Hither And Yon has been delayed – as has my American Spectator column, which I have to try to write tonight.

You up for a Today’s Last Thing? Good. This is what you get – from Monday’s debate…

We agree, Kitty.

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