With all the complexities of Gov. Bobby Jindal’s unpopular tax plan, who knew that his Plan B would be even worse than his Plan A?
At the opening of the 2013 Legislature, Jindal pulled his difficult-to-pass swap of higher sales taxes for elimination of the state’s corporate and personal income taxes. That was a hard sale, in large part because it is such a bad idea for small merchants and working families.
The administration was having difficulty persuading lawmakers that the swap could be made in a “revenue neutral” fashion that would allow the state to get enough revenue to offset the giant loss of income tax revenues in the budget. The governor recognized that the votes just aren’t there for Plan A.
Jindal said the state should repeal income taxes, and he offered no guidance to the Legislature about how to do so. Nor did he utter the words “revenue neutral,” nor did he promise to sign into law revenue-raisers to offset the cost of income tax repeal — about $3 billion a year.
“Let’s get rid of the income tax once and for all in the state of Louisiana,” Jindal told legislators. “Send me that bill to get rid of those taxes. Send me that bill and make Louisiana the best state in the country to create jobs, to raise a family.”
That Plan B would yield a potentially disastrous outcome.
Several bills would phase in repeal of personal income taxes over 10 years. If lawmakers seize upon the governor’s idea and send him that bill, the first year’s cost in forgone taxes would be substantial. However, that first year’s loss might be offset by some revenue-raisers that were elements of Jindal’s Plan A — if those bills can get a two-thirds vote of the Legislature, and if Jindal then agrees to sign them.
These might include a tobacco tax increase or some small adjustment of today’s business tax exemptions, to raise more in taxes.
That might suffice for one year, but what about Year 2 of the repeal, and the years after that?
One of the pillars of state finance would not be knocked over, but would be cut into year after year. The chronic budget crises that have been a characteristic of Jindal’s financial mismanagement would be made exponentially worse, particularly for lawmakers facing the budgets after Jindal leaves office in January 2016.
The governor would get the credit for income tax repeal. His successors get to do the heavy lifting of maintaining state services and institutions, or what’s left of them.
As you can tell, we don’t like Plan B.
If you go fishing for financial irresponsibility in the Louisiana Legislature, you are bound to catch something. Plan B is worse than Plan A, and Plan A was bad for the state.