…not by putting old people out of nursing homes or killing TOPS, or any of the other Parade Of Horribles being trotted out by John Bel Edwards, Jay Dardenne or the rest of the public sector doom-and-gloom crowd in advance of the special session Edwards just called yesterday.
No, the taxes they’re going to raise in that special session will make sure state government doesn’t suffer much at all. Instead it’s going to be normal folks in Louisiana who take it in the shorts.
And the state’s private-sector economy, which is practically dead in the water – it was the worst-performing economy in the country last year and it’s been the worst in the South for two years running as it has actually shrunk in both of those years – will take even more of a beating. Not that very many of this state’s political class gives a damn, as they’ve shown.
As it happens, though, this morning the Pelican Institute released a study showing just how much damage the politicians at the Capitol are going to do when they get into Edwards’ special session and kowtow to him on tax hikes.
Here was the release on the study…
Lawmakers in Baton Rouge continue to debate solutions to the so-called “Fiscal Cliff.” The Governor and his allies have called for new taxes to close the gap between proposed spending and projected revenue, while others have suggested prioritizing spending and right-sizing government would be a better pathway to the Constitutionally-mandated balanced budget.
As the state continues to shed jobs and population to neighboring states whose economies are growing, it’s important to take a deep look at the projected impact of new taxes. Today, the Pelican Institute, in partnership with the Buckeye Institute’s Economic Research Center, releases the results of a study projecting the economic impact of four difference revenue-raising proposals that have been discussed recently: increasing the state sales tax by a quarter-penny, increasing the state sales tax by a half-penny, compressing personal income tax brackets, and reducing individual income tax deductions.
All four scenarios would result in job loss and a decline in the state’s gross domestic product (GDP), key measures of economic health. According to the study:
- Raising the state sales tax by 0.25% would, within a year, lead to the net loss of 1,400 jobs and decrease the state’s GDP by $86 million, while raising $164 million in new tax revenue.
- Increasing the state sales tax by 0.5% would, within a year, lead to the net loss of 2,800 jobs and decrease the state’s GDP by $173 million, while raising $329 million in new tax revenue.
- Adjusting individual income tax brackets (reducing the top of the 4% tax bracket to $25,000) would, within a year, lead to the net loss of 2,600 jobs and decrease the state’s GDP by $191 million, while raising $190 million in new tax revenue.
- Reducing the amount allowable for individual income tax deductions due to excess federal itemized deductions would, within a year, lead to the net loss of 700 jobs and reduce the state’s GDP by $56 million, while raising $56 million in new tax revenue.
Unlike the official projections by the state of Louisiana, the Pelican Institute’s study uses a “dynamic scoring” model, which better reflects the ways in which people and businesses react to government policies. This model presents a more meaningful estimate of how government tax, spending, and regulatory policies affect real-life decisions made by Louisianans every day, and how those decisions bleed through to the larger economy. Follow us on Facebook or Twitter to get the most up-to-date information! And please consider sharing this information with your friends and family in state!
The counterargument to this is “Oh, but raising the sales tax a quarter of a penny or a half-penny is actually a REDUCTION in taxes from the last two years, so this would be GOOD news.”
And anyone who makes that argument needs a drink thrown in his face.
Because those taxes were supposed to be temporary, not permanent, and if nothing is done they’re supposed to go away. The decision to renew them is an affirmative action the politicians in the legislature would take and it would be a NEW tax. Not to do anything means halting the economic disaster those tax increases have caused – the state’s economy has been shrinking ever since those taxes went into effect, let’s remember.
Let’s also remember that by raising these taxes Louisiana is voluntarily making itself less competitive with its neighbors. They’re cutting taxes around the South because those states are getting a windfall from the Trump tax reform, and they’re busy pumping that windfall back into their private economies with tax cuts.
And they’re booming.
What is Louisiana doing? Well, the politicians pocketed the Trump tax reform windfall and put it into the state’s overfed, more-or-less-worthless government so the hard work of cutting it down to size didn’t have to be done, but that wasn’t enough. And when the regular session ends at the end of this week and the special session kicks in on Tuesday, they’re going to decide on some type of tax hike on you and yours to make Louisiana go the opposite way from all the states around the South who are kicking our ass.
What this study can’t model is what happens to jobs and GDP in Louisiana when those other states adopt more business-friendly tax policies and then start romancing our companies to relocate. The numbers will only get worse. And pretty soon it’ll be like the 1980’s all over again in Louisiana, where the joke was “last man out of the state, turn out the lights.”
People think it was a glut in oil prices which did Louisiana in back then. That was only part of the problem. What was the real problem was competitiveness. Louisiana was run by what was more or less a criminal class of politicians at the Capitol, headed up by a future federal inmate in Edwin Edwards, and the hooks he and his cronies set into the business community made this a terrible place to do business.
And once the rest of the country started booming, the fact Louisiana wasn’t competitive created essentially a wind tunnel effect blowing people, jobs and capital out to Texas, Georgia, Florida and lots of other places.
We say this all the time, but when you’re growing at essentially zero and the rest of the country is growing at 1 or 1.5 percent it’s bad – but it’s not catastrophic. People just figure things are tough all over, and they’ll gut it out at home. But when you’re growing at 1 percent and the rest of the country is growing at 3.5 or 4 percent, now it is catastrophic – that’s when your people start seeing that there are better opportunities elsewhere and they start renting U-Hauls to access those opportunities.
And when you lose them to those places which are more competitive, guess what – you won’t get them back.
So don’t think of the numbers in that Pelican Institute study as jobs or dollars. Think of them as your friends and neighbors you won’t get to see at an LSU or Saints game, or at the local festival, or at the neighborhood restaurant. They’re going to find different lives in different parts of the country, their kids will grow up in a different culture, they’ll lose their Louisiana accents and they’ll gradually forget about us.
That’s the damage our politicians are going to do. And it’s worse than just numbers in a spreadsheet.