Our Views: A new glitch in revenue

When one takes the handy deduction of federal income taxes off of one’s state tax return, it makes a difference in the check that one writes to the Louisiana Department of Revenue.

And that’s going to be a bigger difference early next year, as it is almost inevitable that federal taxes go up to avoid a “fiscal cliff” that is a focus of concern in Washington.

But Louisiana’s little cliff will follow, as the state’s future tax revenue declines as federal taxes paid increases — and thus that deduction from taxable income on state forms increases.

Chief economist Greg Albrecht, of the Legislative Fiscal Office, and Jim Richardson, an LSU professor and member of the state’s Revenue Estimating Conference, briefed the Press Club of Baton Rouge on the little cliff.

Albrecht said that his back-of-the-envelope calculation is that — if the tax and budget cuts proposed by President Barack Obama become law — the impact on the state would be around $120 million. That’s not certain to happen, but facing deadlines for even more severe tax increases, Congress is likely to do something.

The little cliff starts affecting state revenue in spring 2014 — and that’s in addition to the chronic shortfalls and rounds of midyear budget cuts required by the chaotic mess that the state budget has fallen into under Gov. Bobby Jindal.

Worse, the little cliff cuts into income tax, one of the state’s more stable sources of revenue. Swings in sales taxes, which make up about a quarter of state tax income, and unpredictable rises or declines in corporate tax collections have made Louisiana a case study in how not to organize public finance.

The landmark 2002 tax reform known as the Stelly Plan was intended to address some of those stability issues in state finance, but Jindal and lawmakers in 2008 foolishly threw away its benefits by cutting state income taxes during an all-too-brief period of high state revenue after the storms of 2005 and 2008.

Other tax cuts and a profligate series of corporate tax breaks have only made the state’s budget situation worse.

Things have been a mess since, and the little cliff will only make it worse.