There’s a right way and a wrong way to perform tax simplification, and
it would appear the most important figure at the anticipated outset of the task
in Louisiana has got the right attitude about it all.
During last session of the Legislature it resolved
to study the tax break structure of the state. Around $4
billion, or something approaching a third of all potential taxes
collectible to the general fund, get shielded from collection by the state as a
result of a myriad of such exemptions. Because of tight budgetary conditions
over the past few years, covetous eyes have turned towards these in the hopes
of the abolition of some of these might make up some revenue ground.
As it is, many of these exemptions are narrowly tailored to favor a certain
activity, and often the narrower they are, the less revenue forgone exists. At
the same time, even recapturing these revenues does not come without a price,
as the extra economic activity produced by their presence disappears with
theirs, chipping away at revenues.
Yet in this task, the overall goal cannot be perverted into an exercise
of finding money to spend. Instead, the purpose should to create an optimal
fiscal structure that encourages economic growth that pays off sufficient tax
revenues to pay for right-sized government. Thus, it was encouraging to read
Gov. Bobby
Jindal’s brief remarks concerning the effort beginning by September with a
report issued next Feb. 1: “We’re opposed to raising taxes, but we’re open to any
review of the tax code that would make it fairer, flatter and lower for
Louisiana businesses and families.”
So, for example, without all the
exemptions, the corporate income tax collection would have been in fiscal year
2012 $1.657 billion. One of these, the net operating loss deduction, makes up almost
a fifth of that total and almost doubles the actual corporate tax paid,
although not every corporation loses money (although apparently over 28,000
last year claimed they had within the past 15 years as losses, limited in
what can be claimed in a year, can be carried forward that long). Perhaps then
just wiping that out and then collecting a flat two percent from all, rather
than the progressive 2-4-6 laddered rates, might provide for greater revenues
than currently enjoyed, as it would create an incentive for corporations
wishing to reduce their tax burdens not to engage in money-losing activities
but instead to put more into productive activities whose returns relatively
increased as they marginal tax rate on them decreases.
This is the posture to put the
exemption regime into. As a portion of the cost of business for each firm, with
expanding business encouraged by a lower, flatter rate, taxes as that portion may
actually go down because economic activity increases more. In the aggregate,
the state may collect more because of creating incentives for investing in more
productive areas, producing more revenues to tax even if that is at lower
marginal rates.
3 comments:
Dude, you really are a waterboy for Jindal.
This is not his idea. This idea began about 2 years ago from some of the same House fiscal hawks you aided the administration in attacking last month.
Once again, like Rolfe McCollister, you're going to just take the work/idea someone else pushed and make it seem like Jindal's excellent plan now that he's jumped on board.
Get your head out of his lap. You're a disgrace to conservative Republicans in the state by acting like this.
Amen, amen! to the prior commenter.
Did the Scorecard invent the internet, too?
What clabber!
Associate Professor Sadow, since you have a problem with government, when are you going to get of government welfare yourself? Will you then start thinking for yourself?
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