Cutting Taxes in Louisiana

Along similar lines as what Kansas has been doing with its budget for education, Louisiana has been cutting in favor of doling out large tax cuts and credits for business getting in return little if any economic impact. While A&E’s Duck Dynasty receives ~$330,000/episode from the state, Louisiana State University is preparing for additional budget cuts to meet the $1.6 billion State of Louisiana self-inflicted budget deficit much of which was caused by the state legislature and Jindal’s repeal of the balance of the Stelly Plan in 2008.

The state never had a history of stable revenue growth and was faced with shortfalls until the legislature came up with a plan to shift taxes from mostly a regressive sales tax to a progressive state income tax as well as other taxes. Income taxes grow faster than sales taxes growth as incomes repond faster in good economic times. The progressive Stelly Plan raised taxes on higher income brackets in 2002 and cut the state sales taxes on electricity, natural gas, food and water for residential use. Before 2003, the State of Louisiana had gone through annual budget crisis. With the passage of the 2002, the Stelly Plan raised income tax rates to 6% on individual $25,000 to $50,000 incomes of; established 4% on joint income from $25,000 to $50,000, and 6% >$50,000 on joint income; the state had a balanced tax system mostly reliant upon the income tax, severance taxes, and sales taxes. In 2007, when Governor Jindal was elected, the state experienced a surplus in revenue not experienced in previous years.

Jindal inherited a $1.1 billion surplus from former Gov. Kathleen Blanco. He blew the surplus in his first year as governor embracing the rollback of the Stelly Plan voters approved in 2002, the elimination of excess itemized deductions, and the higher rates which resulted in a total hit to the state of $1.4 billion in 2008. The rollback of Stelly has cost the state more than $300 million a year since then.” It is after the tax rollbacks, where more of the blame other than mismanagement is foisted upon Jindal. Jindal has increased tax exemptions and credits on businesses regardless of the benefit to the state in jobs or business growth. Rather than maintain the UAL (retirement funds) at a fundable level, its liability has grown from $12 billion to $20 billion setting up a day of reckoning in the future.

According to The Advocate; Louisiana gives away more taxpayer money than any other state on a per capita basis.

– “Duck Dynasty,” Louisiana is on the hook for nearly $330,000 at last count for each episode;
– $700,000 to Wal-Mart to build new stores in two affluent suburbs;
– Valero announced an expansion, creating 43 new jobs;
– Louisiana promised to cover $10 million of the cost, or nearly a quarter of a million dollars per job;
– Film incentive program cost state taxpayers $251 million last year,
– Refunds of a property tax that businesses pay on their inventory have more than doubled in the past seven years, reaching $427 million last year;
– The solar power tax credit was billed as having negligible cost to taxpayers when it was created six years ago andballooned to $61 million in 2013. That is because it is hard to pass up: It covers 50 percent of the cost of solar installations, which, when combined with a similar federal program, gives homeowners a robust return on their investment;
– Tax exemption for fracking wells — experimental technology at the time the tax break was passed 20 years ago — is now widely used and last year cost the state $240 million;
– Enterprise Zone program has done little to spur investment and job creation in poor areas, its original intent. Instead, the bulk of the taxpayer money the program doles out — an average of about $70 million annually in recent years.

To meet the annual Louisiana budget shortfall for a total of $1.6 billion, Governor Jindal has asked state universities to expect $300 to $400 million less. For its flagship university, LSU would be on the hook for 40% of its operating budget and 51% of its funding from the state or $60 million. LSU President Alexander puts it into perspective:

– “In addition to the freeze on 125 (new) faculty positions, we’re talking about potentially losing up to 250 to 300 positions at the main campus,”
– The Workforce and Innovation for a Stronger Economy Fund or WISE, a fund that was set up to send $40 million to higher education institutions around the state in an effort to help higher education programming match the state’s job market, is likely to be scrapped as a part to balance the state’s budget.
– “We will go from the second highest graduating class in history to being eventually 2,000 less in graduates.”
– “The potential that could hit us would be tuition fee increases, 3,000 less course offerings, etc.

Less notable universities in Louisiana without the political influence would fair worst under Jimdal’s budget cut program. The state no longer has the money to fund K through 12 education, higher education such as LSU, state healthcare and mental programs as the funding has disappeared in tax breaks to business boondoggles and unfairly skewed to those making up 1% of the income (~$25,000 advantage annually). Governor Jindal is a hopeful presidential candidate. To point out how silly some of the business tax breaks are given at the expense of Louisiana citizens and the state, the state legislature and Jindal sponsored Sales tax holiday for the Purchase of Weapons.