Gov. Bobby
Jindal’s strict interpretation of holding the line on taxes – they don’t go
up, even if that means keeping unproductive tax breaks, unless there’s some
relief elsewhere – has had to his point the very salutary effect of putting
right-sizing government ahead of tax increases, but includes the less fortunate
impact of treating tax breaks that do not demonstrably impact economic growth
in a positive or efficient way as the same as those that do. This attitude
seems to have changed as last week his administration announced that portions
of these breaks should be eliminated.
In other words, if a credit or
deduction means, after payment of state taxes, that a filer would get some kind
of rebate beyond its liability as a result of these, the Jindal Administration
has proposed that the state hold onto this excess. The meets the
no-tax-increase criterion in that taxes would not go up, but only that a bonus which
technically is an expenditure that the state hands out would disappear.
At this time, the nebulosity of the
idea defies any definitive count on expenditure savings, and leaves other questions
unanswered. For example, would that include the state’s practice of buying back
at a 15 percent discount of its Motion Picture Investor Tax Credit? If so, even
as that would have a minimal impact on FY 2016 as typically it’s some time
before the accounting is completed for film production in a year, that would
cut down drastically on the program’s expenses – and lure to outside producers –
as for most productions these qualify for far more in credits than their Louisiana
tax liability, with them selling these to other state taxpayers or to the
state, with the majority of the amount bought back by the state. That would
completely – and welcomely – alter the nature of the program, which those
interested in stamping out government waste have argued vociferously to rein
in if not discontinue while the few who benefit from it fight tooth and
nail to let the gravy train for them continue, as do some lawmakers whose
district disproportionately have funds leveraged by this giveaway enter into their
districts.
This also introduces political
dynamics where a blanket approach to retain these funds may not work. For
example, one of the largest such credits in dollar terms in the Earned Income
Tax Credit, which pays money to people above and beyond their tax liability who
work. While designed to encourage work as a kind of salary supplement, all it
tends to do is attract people to low-skill jobs and acts as an inhibitor to
their taking more hours or in trying to advance in their skills and occupations.
As such the EITC inefficiently
spends taxpayer dollars, but as it acts as a kind of handout that pays
above the actual worth of the work done and transfers wealth mainly to
lower-income households, some policy-makers fiercely protect it.
And this support matters, for at
this time no one really knows what would have to be done to get rid of these,
even temporarily. While the Constitution permits
the Legislature to suspend a law by the same margin required to make it law, debate
rages around the Capitol about how it all works. Legislators could suspend
these provisions for the fiscal year, but whether they could do so by a simple
majority (for a number of reasons, including statutory definition
of whether such revenues are recurring, a House rule
addressing the same, and if the Legislature wants to change the decision rule
about classifying such revenues) does not seem clear at this time.
If simple majorities can suspend,
the Legislature could go further and wipe out not just the “extra” portion that
the Jindal Administration has signaled it would countenance excision, but
entire credits temporarily. This could cause intrigue between different
factions in the Legislature and also with Jindal over procedures. At the same
time, it also presents Jindal with a political sidestep to his no-tax-raise
pledge, for he could say he did what he could and held the line on any increase
not offset by a decrease elsewhere but that as the Constitution allows for
suspensions without a governor’s input, these can get through and he would not
face responsibility for potentially politically-damaging cuts to services that
otherwise would have to happen without the extra revenues from the suspensions.
It all adds up to some convoluted
machinations in the months ahead. They begin at the end of this month when the
legal gubernatorial presentation of the budget occurs, and what decision rules subsequently
get adopted will influence greatly what solutions come forward.
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