All is sort of well as ends sort
of well: the Louisiana Legislature coughed up a fiscal year 2013 budget after a
lot of tugging back and forth that didn’t really go anywhere. It accomplished
important objectives insofar as it did not abscond with more of the peoples’
resources yet made reductions in ways that will have little or no impact on the
quality of service provision and maintains all but the expenditures of lowest
necessity. But in the process of getting there, in no way did it bring clarity
or resolution to the largest questions of all: what is the appropriate size of Louisiana
state government and how best to fund it?
While elements of both the left
and right attempted to ask this question, unusually they came into communion
with each other by asking it the wrong way, confusing symptom with disease.
Both identified lack of revenues as a problem. Both conceptually err by doing
so.
From the antediluvian left, it
claims too many tax exclusions and exemptions and too little progressive
taxation sap the state of revenues that could pay for stuff, requiring that
policy increase them through the excising of exceptions and transfer of wealth
from those that disproportionately create it. This myopic view discounts the
fact that, on the whole, among the states the state’s tax burden
is no better than average, perhaps even a bit on the high end, and also completely
ignores
the spending side of the equation. It assumes that current spending levels
are absolutely legitimate and justifiable, even low, without any thoughtful
critical analysis of that assertion. Such an attitude it akin to coming up with
a cure, i.e. reduce exceptions and raise taxes, to symptoms, lack of revenues,
without understanding the disease, excessive spending which defines revenues as
lacking, behind them.
From the populist right, it
argues that a lack of recurring revenue exists meaning correction must come on
the spending side, and can be through better spending choices and greater
emphasis on efficient use of resources. This case on the spending side has far
stronger evidence to support it but on the revenue side it makes a
fundamental error: in fact, the state
has plenty of recurring revenues to support current spending at the
present, but an artificially-imposed fiscal structure unnecessarily cordons off
some of those revenues that then require special legislative efforts to get at
them. Here, the lack of recognition that the problem is one of definition and
structure, either from genuine unawareness or from a desire to manufacture a
false problem to utilize as a method to score political points, is the disease
unacknowledged with the cure of reducing spending largely indiscriminately being
based upon the erroneous notion that slack resources exist equally distributed
across government.
Thus, both factions created false
narratives about the issue, as revealed throughout the budget process this
session, and neither therefore can provide a valid solution to the condition of
fiscal pressure the state looks to experience for at least another year. The
state does not have a revenue problem, but a spending problem. Yet focusing
only on the spending side by itself cannot produce the system evolution needed
to create the fiscal structure that may gauge with accuracy the matching of revenues
necessary and appropriate to fund the identified and prioritized genuine needs
of the state.
Accomplishing this requires overcoming the mistaking of symptom for
disease. As a start, there must be recognition that the great bane of the
conservative faction, “one-time” money, is more properly defined as largely
recurring funds badly matched to specific spending mostly unevaluated for its importance
and purpose. Only until all fiscal dedications are reviewed with precisely that
kind of evaluation in mind and the necessary corrections then made, meaning
halting over-funded purposes if not eliminating some of them that are not
actual needs, can the debate progress to the next stage.
With this deliberate matching in place, meaning some spending curtailed
and some revenues formerly attached to it freed, the debate must shift to how
many of those revenues should or need go to areas in the past disproportionately
prone to lack of funding. Therefore, this also requires that those areas also
face scrutiny as to their level of appropriateness. More likely than not, these
also might face reduction, leaving over some excess revenues getting collected.
Having that in mind, the whole of Louisiana’s progressive yet riddled
with exceptions tax code must get overhauled with the purpose of not gathering
these excess revenues. A good start would be to wipe
out all corporate tax loopholes along with the corporate income tax,
followed by flattening
individual income tax rates at a standard below the current top rate and
getting rid of virtually all of those exemptions, exclusions, credits, and
deductions, with the eventual goal of eliminating that tax as well. The long
term bonus besides clarity and simplicity in matching revenue needs to spending
priorities would be increased state economic growth entailing increased
revenues beyond what the current inefficient system encourages.
Of course, this plan costs policy-makers in that it requires work and
political courage to stand up against special interests that would stump for
maintenance of dedications, exceptions, and spending, which makes its chances
of successful implementation uncertain at best. Throw in the loss of benefits
from being able to use the current system to promote political agendas, such as
agitating for higher taxes and more spending or posing as faux fiscal conservatives who lust for credit but in reality shirk
in taking responsibility for making justified revenue and spending choices, and
its probability of implementation decreases still further.
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