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22.3.05

Stelly still trying to make a silk purse out of a sow's ear

It’s not only journalists who write disingenuous pieces, but politicians as well – actually, ex-politicians, as Vic Stelly demonstrates.

Stelly for years to come will be championed by some and reviled by others for the tax change plan that acquired his name. Basically, it rid Louisiana filers of taking deductions beyond those countable against the federal income tax standard rate and forced more people into higher tax brackets in exchange for dropping off “temporary” sales taxes (prohibited on unprepared food, utilities, and drugs unless the Legislature voted periodically to allow them; in essence, disallowing the Legislature from being able to impose these taxes even temporarily).

Most people’s income taxes went up as a result of this by amounts that more than offset any sales tax savings they received. This was the original intent of the backers of the plan, because income tax revenues were growing annually at an 8 percent clip as opposed to the 1 percent rate of sales taxes. In short, they wanted to tap into a more lucrative source of revenue, simply to get their hands on more of the people’s money.

But not according to Stelly:

The reason for the ‘Stelly Plan’ in the first place was never just a means to raise personal income tax. The goal from the word go was simple – get rid of the ridiculous unfair "temporary" sale tax on necessities of life (food, drugs and utilities) that we had continued to renew for 16 years.

This is disingenuity at its finest. At any time the Legislature could have forgone imposing the 4 percent tax (for a couple of years it did with 1 cent of it). There was no need whatsoever to link it to a raise in income taxes. There would have been more red ink, but perhaps that would have spurred the Legislature on to make the hard but necessary choices in cutting programs ill-serving the state and wring more efficiency out of the bureaucracy. If those temporary taxes were so “unfair,” nothing was stopping the legislature from forgoing them.

But Stelly tries to justifies the linkage:

A study … reported among other things that we rank 40th in America in state income tax, have the most lenient tax brackets in the country, and are one of only a few who allow for "excess itemized deductions."

We therefore chose to only make changes in those two areas (brackets and deductions). We still allow the most generous personal exemptions (which we double for retirees), a deduction for all federal taxes paid, and do not tax public retirement benefits whatsoever. We currently rank 45th in America in total state and local tax burden. Home mortgage interest and charitable contributions are still fully deductible on our federal returns.

First, Stelly is dead wrong about the 45th place ranking, by about half. I don’t know when that was true, but as of 2004 Louisiana was 23rd, and you would think Stelly would be more careful in his assertions (or he’s spreading false information in a desperate attempt to back himself up). But more telling is Stelly’s use of a comparative ranking as the appropriate metric by which to consider whether the tax burden ought to be changed.

In other words, even if we were low and lenient compared to others that the people of the state weren’t paying their “fair share” of personal income taxes? Such arrogance belies an attitude that it’s not really the people’s money, but the government’s. In determining the use of government’s coercive power to take from the people, one must analyze it in absolute, rather than relative, terms. What if 40th, or 45th, is too high? Just because Stelly tells us people from other states are jumping off of bridges, does it mean we have to follow them?

Then he makes one final attempt to justify it the removal of “excess itemized deductions”:

Many fail to remember that it was the Legislature itself that removed 50 percent of this deduction two years before the Stelly Plan passed.

And your point? Just because the Legislature did something dumb doesn’t mean you have to follow (review the “jumping off of bridges” example). But Stelly has to get in a shot at state politicians such as state Reps. Pete Schneider and Peppi Bruneau and Sen. James David Cain who want to restore the deductibility of charitable and home mortgage expenses on state taxes:

[I]t is more than a little aggravating to read misrepresentations from political demagogues who have made a career of feeding from the public trough while never stepping up to the plate and submitting a plan of their own, unless of course it is self-serving or has to do with pork barrel projects.

I don’t seem to be the object of his scorn, but I’ll give you a plan: restore these deductibles and institute a flat 4 percent tax regardless of income. That may well raise more revenue than the current graduated 2-4-6 percent brackets and certainly is fairer. Why punish the most productive people in society with a higher rate? They’ve already contributed once by creating more wealth that subsequently gets taxed; why take that productive capital out of their hands by forcing them to make another, unjustified contribution to the state?

In essence, the Stelly Plan represents just another link in the long history of Louisiana tax policy that favors redistribution and discourages economic development. It’s that kind of thinking that has gotten us into an economic mess, and no amount of dressing it up by an ex-politician can change that.

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