Reduce bad surprises, stimulate growth by nixing corporate income tax

Because of the complexity of state government, the shortness of legislative sessions, and the culture of overregulation in Louisiana, at the end of any session a number of bills go forward that, simply, are great unknowns when it comes to their fiscal impact. A good example from this session is SB 259, and provides another reminder why the state should change drastically its corporate taxation laws.

This bill was designed to aid one firm to give it incentive to not transfer any or all of its operations elsewhere. But as the clock ticks to the end of the session later today, nobody is sure exactly just how many companies could claim this tax break. Worse, it might actually foist a higher tax bill on Louisiana-based firms. All that prevents its enacting would be a gubernatorial veto and Legislature failure to override, and its consequences still are not clear.

This rings typical of the confusing and confiscatory nature of Louisiana’s corporate tax code. Not only is its top rate the 15th highest of all states, but it also tacks on a “franchise tax” that taxes on the basis of the value of the firm (separate from property taxes, at the local level, paid on real property that in part makes up the value of the firm). Unlike all but one other state, part of this “value” includes debt. And then there are a dizzying variety of tax breaks for a multiplicity of purposes whose savings for corporations probably in part get eaten up by the cost of all the record-keeping to claim them (and does not include “special” taxes such as those upon forms of gambling).

SB 259 is just another one of these breaks. It would be so much simpler to get rid of Louisiana’s corporate taxation’s five levels, get rid of all the breaks, and just set a flat, low rate. Even better would be to get rid of a corporate income tax entirely; Nevada, Washington, and Wyoming do without any form of them entirely and are doing better than Louisiana economically. This reform would attract businesses, bureaucratic expenses to track everything for the state government would zoom downwards, and the effects of it (especially if at zero) would be easily predictable.

It’s not like eliminating corporate income taxation in Louisiana would be that big of a problem. For fiscal year 2003-04 its revenues constituted only about 5.75 percent of the general fund’s (little more than 2 percent of the total operating budget’s). The Revenue Estimating Conference “found” almost that $373 million in its last meeting last month. No doubt the boon of economic activity spawned by the elimination in short order would more than compensate for this forgone revenue.

But, of course, none of this was contemplated this session. Instead, by contrast, we get things like HB 795 which operates in reverse, granting the governor more leeway to establish more tax breaks. Most obnoxiously, it grants the governor the sole power to approve whether a corporation gets a break; there’s some good-old-girl behind-the-scenes preferment opportunities and horse-trading just waiting to happen under that arrangement.

It’s unlikely that the House will alter that provision in the next three hours, but one can hope. And to dream really big, maybe serious corporate income tax reform will occur during the next fiscal semi-only session two years from now, which may be two years too late.

Blanco, legislature do little this session regarding health care costs

It’s all over but the shouting, and almost nothing happened this legislative session to introduce necessary health care fiscal reforms that could save taxpayers hundreds of millions of dollars and/or vastly increase the level and amount of service to those using state health care resources.

On the budgetary side, Gov. Kathleen Blanco completely whiffed. Earlier in the year she talked of restructuring long-term care reimbursements to reduce the nursing home bias in provision and enabling more services to more people at a cheaper cost. She reneged on this when the state’s fiscal picture improved – in other words, like a smoker considering cutting back on the activity because of lack of funds, but then discovering some extra money and deciding to smoke up instead of kicking the habit.

(The Senate did add more money to fund the New Opportunity Waiver program to allow 50 more people to get home-based care. Whether it survives conference and passes Blanco’s muster remains to be seen.)

Bonus doesn't change facts about government-before-education politicians

Senate Democrats and some Republicans ran for political cover with an amendment to HB 842 which provides not a teacher pay raise, but a one-time bonus to school employees with teaching certificates. Further, it only goes to some, those whose districts will not be fully funded out of the Minimum Foundation Program formula that computes raises to meet the average raise amount. Only those districts which would receive only some or no additional monies required to go to raises (almost half) will have such monies given to them.

The formula is computed partly on the basis of “effort;” that is, districts, as determined by this complicated formula taking a number of factors into account, which, given these, put forth a maximum “effort” to get dollars to education get extra compensation. In short, the “lazier” districts get rewarded by this (but just one time).

What is most interesting about the unanimously passed amendment was the same Democrats who complained that the Republican plan to make for permanent raises would remove a $13 million payment to the unfunded accrued liability of state retirement systems suddenly had no qualms about doing the same to fund these bonuses. Sunday night, Democrats howled that this amount again could be saved by making this “extra” payment instead of giving it to educator pay raises; Monday afternoon, all these concerns miraculously vanished and it didn’t seem to matter.

Don’t be fooled by these gutless manipulators; they are no more interested in steering more funds to salaries today than they were over the weekend. What they are interested in is not being seen as the manipulators they are, users of teachers to wrench more money out of the people’s pockets and into government. Unlike most of the Republican senators and mostly Republicans in the House (indicated by this vote), the only genuine proof they can offer about raises is of taxes, not for educator’s salaries.

In the future, as long as the GOP keeps reminding the public of this, the majority of the public will see these government-before-education politicians for what they are. And that will include viewing Gov. Kathleen Blanco, sure to keep this provision in the bill if it reaches her desk, as the poser that she is on this issue.

GOP senators (mostly) for better education; Democrats favor big government

Legislative Republicans and Democrats showed their true colors in their decisions concerning separate amendments to the state operating budget – Republicans want to spend efficiently and give educators at all levels pay raises, while Democrats want to use educators to grab more of the peoples’ money.

The amendments, which differed only in the breadth and amount of the raises (one including school support personnel, the other not), called for cuts of enhancements (that is, money added to current spending) across the board of 1.36 percent from discretionary funding from the general fund. During the debate, a number of Democrats floated fictitious arguments, which were dealt with by the three GOP sponsors, Sens. Jay Dardenne, Tom Schedler, and Craig Romero.

FICTION: Sen. Francis Heitmeier said the removal of $20 million that would have gone to local school boards would punish education.
FACT: The $20 million simply would have been rerouted into salaries away from bureaucracy. Already a resolution has been passed requesting that 65 percent of funding for education go into teachers’ salaries; Louisiana only gives out about 60 percent.

Hightower: Shreveport's Louis XIV

You must hand it to Shreveport Mayor Keith Hightower when it comes to persistence. If the facts don’t fit his idiosyncratic worldview, he either changes them or dispenses with them entirely. He gives us another example of this in his latest comments regarding state Sen. Max Malone’s amendment to the capital outlay budget which prohibits use of $12 million authorized by the state to be used to build a convention center hotel until litigation is settled and a public vote on the project occurs.

Says Hightower, “It's just politics. It's not politics for Shreveport. It's a political agenda, and it's bad politics.” What he seems to mean here is he believes Malone is pursuing a political agenda against Hightower, while Hightower equates his agenda with Shreveport’s. In fact, Malone has been very consistent in stating the reason behind his opposition the hotel, that such a huge capital expenditure ought to have the vote of the people, and if it fails to pay for itself, then only the people have themselves to blame.

More than once Hightower has said he doesn’t fear such a vote, even though the only reliable public poll ever taken on the idea (now around nine months old) showed 76 percent were against the idea. He has argued taking a vote would slow things down too much. Buying this for the moment, then there’s another, simple solution to the issue: if the amendment comes to pass and Hightower still does not want to bring it to a vote, just sell $12 million more in bonds to bring the total city commitment to $52 million (which would also render moot all lawsuits). As stretched as Shreveport’s bonding capacity has become under Hightower’s reign, it still can afford this.

Yet Hightower instead rants and raves about Malone’s actions instead of calmly proceeding to the next step. If Hightower were as confident in the hotel project as he projects, what’s the difficulty in selling $12 million more? His rhetoric, in fact, suggests no understanding whatsoever not only about Malone’s motives, but any genuine grasp about the reality of the situation:

"I'm once again amazed that Max Malone is trying to take state dollars from Shreveporters," Hightower said. "In effect, he's worked the entire session to take things from Shreveporters and, to my knowledge, has not delivered anything. To take $12 million from us is absurd, and I hope the voters take him to task over it."

First, Hightower doesn’t seem to understand that the $12 million is not “Shreveporters’,” it is a gift from the taxpayers of Louisiana for a particular purpose which, quite frankly, Hightower does not seem to be following (the purpose of the lawsuit). Neither is Malone “trying to take,” he is just suggesting conditions by which the Legislature and governor may institute to safeguard state taxpayers’ monies. (Note that, per capita, about 5 percent of that money actually is Shreveporters’, the proportion they will have to pay in to pay off the bonds backing it, so in essence Malone is helping to protect Shreveporters. Also note that Hightower’s phrasing of “take” means he implies a public vote would result in a defeat, preventing that money from being used. What does he really believe then, this or his rhetoric that a vote would bring approval?)

Second, the next sentence probably refers to Malone’s bill SB 333 which changes the selection of members to the Caddo-Bossier Parishes Port Commission which would leave Shreveport officials with fewer unmediated choices to the board. This is good legislation but since in Hightower’s mind everything is about him, that any legislation that impacts his policies negatively must be directed against him because others are against him (isn’t there a word for this?), he can’t help but call it negative. This sentence also reveals Hightower’s thinking about the nature of government: to him it is all about “bringing home the bacon,” not serving and leading the governed. By contrast, Malone’s voting record has shown he is more interested in making good decisions for the people, rather than putting his name on plaques.

Third, the last sentence belied the political mentality of Hightower: a pure politician looking for the next office to hold. That explains why he assumes Malone, who is term-limited in the Senate, is running for something again to create the situation where “voters take him to task over it.” Much more likely, were Malone to do something like run for mayor, voters would thank him for protecting their interests and pocketbooks from Hightower. And the real eye-opener here is the idea of “taking $12 million from us,” as if it were Shreveport’s to begin with (not the state taxpayers’) and that his policy, despite the poll numbers, actually stands for “us.”

What seems to sum up Hightower’s political worldview is “L’État c’est Moi.” Rather than trying to provide leadership through persuading the public and all policymakers who count and/or by following the will of the people, Hightower believes that he with inerrancy determines what is good and bad for the people, that he is they. Only that attitude can explain his remarks on this subject – an attitude that performs a great disservice to Shreveport on this, and potentially many other, issues.