Our Views: For the poor, a tax voice
If the poor in Louisiana don’t have much of a constituency at the State Capitol, where better-heeled interests predominate, an expression of concern from the state’s clergy might make some trouble for the sales tax increases proposed by Gov. Bobby Jindal.
The delegation of clergy members writing to express doubts about sales tax increases included more than 250 pastors of predominantly Protestant congregations, but also spanning the racial divide of Sunday mornings in Louisiana.
Their main issue: Louisiana’s “unfair and regressive tax structure” that Jindal’s plan might well make worse, not better.
In outline, although not yet in detailed legislation, the governor’s plans include elimination of the personal and corporate income and franchise taxes. The loss in state revenue would be made up, mostly, by an increase in sales taxes and broadening the tax take from sales taxes by levying it on services not previously taxed in Louisiana.
Life as the clergy see it is not fair. “Currently, families earning minimum wage (less than $16,000 per year) pay 10.6 percent of their income in state and local taxes; the average Louisiana family pays 10.1 percent of its income in taxes; while the wealthiest Louisiana families (earning over $1 million per year) pay only 4.6 percent of their income in state and local taxes,” the open letter said. “That is unacceptable, as a starting point.”
That is the starting point, but not enough for the governor. Jindal’s plan — leaving aside open questions of what additional services will be taxed — raises the sales tax to a proposed 5.88 percent. That’s only the state portion of the sales taxes most people in Louisiana pay. The state would likely have the highest combined state and local sales tax burden in the country.
“It is universally recognized that sales taxes create a disproportionate burden on poor and moderate-income families, who spend nearly all they earn,” the clergy letter said.
For Jindal, who promotes the tax swap as a way to generate new jobs in the state, the issue of the regressive nature of sales taxes has not gone unrecognized. He has suggested, although without detail as yet, that he has ideas about how to mitigate the impact of sales taxes on the poor.
Like the clergy, we are concerned that whatever is proposed might not be enough: “Any increase in the sales tax would deepen the root causes behind the unfair and regressive nature of our state’s tax structure and worsen the burden for poor and moderate-income families in our community.”
The clergy introduce another issue, particularly relevant to those dependent on state services, sustainability of the state’s tax base.
“Swapping income taxes for sales taxes replaces a faster-growing revenue source with a slower-growing revenue source,” the clergy letter noted.
“If our state begins to rely even more heavily upon a slower-growing portion of our economy for revenue, we will face deficits and service cuts down the road that make our current ones seem small,” the letter said. The letter is available at http://www.lafaithcommunity.com.
We appreciate the latter point being made, for that was one of the principles behind the landmark Stelly tax reform plan of 2002. It raised income taxes to reduce sales taxes, by eliminating sales taxes on groceries, residential utilities and prescription drugs. Those constitutional exemptions remain, and Jindal has said that he will not seek to change them.
That means that any new levy won’t be as regressive as a food tax, but it does mean that Louisiana’s revenue picture needs to be part of the tax package discussion.
The Stelly plan’s income tax levies helped to create a growing revenue stream, but Jindal pushed big tax cuts that eroded the general fund, leading to many of the cuts referred to in the clergy letter.
If there is original sin in this tax debate, we suggest it is the repeal of the Stelly income tax provisions. The instability that has ensued in state finances leads to all sorts of tributary sins.