Gov. Bobby
Jindal seems to have developed a pattern of choosing thematic approaches to
each legislative session, and shortly after the conclusion of the most recent
(with education reform, of a high-quality type as it turned out, that one’s
theme) he alerted
the world that simplification of Louisiana’s corporate and personal tax codes,
with among the highest top income rates and most exemptions of all the states,
would get a deserved overhaul if he had anything to do about it next session.
He plans to lower rates in exchange for fewer exceptions, allied with an effort
in the Legislature to review those exceptions.
Of course, this threatens directly both the left’s power and privilege
as well as its core faith in an America rigged in favor of the wealthy, where
it responds to this imaginary environment by trying to use government to rig
America in favor of its special interests. The system Jindal prefers removes
government from making decisions about winners and losers, i.e. who gets
exceptions and who doesn’t, while these opponents precisely want government to
maximize exceptions because of the control it gives them as a tool to keep
power and privilege flowing their ways, and to keep higher rates in order to
satisfy their craving to redistribute for ideological salvation and to buy
electoral support.
So, upon notification
of the issuance of a set of briefing papers concerning simplification, the
media sought out one of several most reliable shills on the left, state Rep. Sam Jones, for
comment, whereupon he delivered this paean to the wonderful, wild, and wacky
world of televised wrestling: “It’s just really a smackdown on the middle
class, and I certainly would be opposed to that kind of logic,” and elaborated
that he feared the governor would try to help the wealthy by lowering tax rates
while hurting people with modest incomes by eliminating tax exemptions on
groceries, medicine and utilities in order to keep these proposals as a whole
revenue neutral.
Note the tactics here. First, he subsumes the entire exercise into a
single kind of exemption, both the largest (at almost $1.1
billion in forgone revenue in fiscal year 2011) and one of the most
distortive for economic growth and fiscal efficiency purposes. Second, he
frames it into an overgeneralization that assumes that if anybody of the
“deserving” (i.e. non-wealthy) as a result of the process pays more taxes that
it affects everybody in that category in the same way. Finally, he inserts an
idea that neither Jindal nor anybody else has endorsed, raising middle-income
household’s taxes to provide relief for those with higher incomes. In short, he
addresses just part of the issue in a way that bears no relationship to
reality.
About the only useful portion of his opinion on the issue is
acknowledgment that the exemptions he cites almost certainly must be addressed in
order for any meaningful change to come, given their sizes of $300-400 million
a year each. But Jones, whose financial
disclosure reports tell us real estate makes his family personally wealthy
and whose major source of income is taxpayer-subsidized pensions from
government service, likely has little idea about how that other 99 percent
live.
He is correct in one respect: reduction of elimination of one to all of
these exemptions will largely move money around for the middle class, not the poor.
As it is, only those close to the poverty level would be affected at all relevant
to basic necessities because they pay little or nothing for those anyway, and
little or nothing in income taxes (if not getting money kicked back to them
through the state and federal Earned Income Tax Credits). Medicaid for most picks
up their medicine, Supplemental Nutrition Assistance Program, Women, Infants,
and Children (which is actually state tax exempt), and others their basic food
bills (although probably a good chunk of this is spent by them on prepared
foods not covered by the exemption), and other federal programs may pick up
their utilities costs (although the total state tax on this probably is not
more than $100 a year in any event).
The middle class, of whom not many can benefit from these kinds of
programs, would be most affected by change to exemptions. But its members,
unlike almost all among the lower-income, pay income taxes. Using a purely
static analysis, and assuming ‘”middle class” is defined as Louisiana income
tax filers from $20,000 to $100,000 in income, they pay an average of
$1,101 in state income taxes, of which 62 percent of that number pay at the 4
percent rate and the remainder at the 6 percent. This means an average tax
savings, if a flat 2 percent rate came about, of $304 per filer per year would
come under this kind of simplification. To offset this on groceries alone, assuming
no more exemption on the state’s 4 percent rate, a household would have to be
buying $7,600 a year in unprepared food, or over $633 a month.
Most households don’t have to spend that much; according to federal
government statistics, even a family of two adults and two children doesn’t
spend that much under its “thrifty” plan (which still meets all recommended
quantity and nutrition criteria). Of course, these are national statistics (actually,
Louisiana’s costs probably are significantly lower), and households may choose
to spend much more and/or may get a substantial portion of chow from eating
out. Yet the larger point is that they can choose their budget in this regard, knowing
the tax implications under any change. Perhaps consumption patterns will change
when the possibility exists that more tax could be paid under a change for foodstuffs
even with income tax savings.
And, in this specific example, that may not be a bad thing. Louisiana has
the second-highest adult obesity
rate in the country at a shocking nearly one-third. If the price of unprepared
food relatively does go up, maybe that will encourage less consumption and/or a
shift to unprepared from prepared food (the latter generally considered less
healthy) consumption in order to save money. Both would affect favorably this
crisis rate.
There’s medicine (but we’re told that the imposition of the Patient
Protection and Affordable Care Act will drive this tax burden way down) and utilities
(again, usually a relatively much smaller expense) to add in, but these
back-of-the-envelope calculations should tell us that quite a number of
middle-class families will be better off under this kind of trade. And it’s
worth remembering that, in sum total, wealthier earners stand much more to lose
in exemption reduction simply because they take more of them and for bigger
amounts – the two percent of total filers between $200,001 to $500,000 in
annual income take an average of $1,000 in credits, while the three-times many
six percent of total filers between $50,001 and $60,000 take an average of $78,
so the wealthier filers’ percentage tax savings of income will be much less,
even as their total tax savings still would be higher (unless they very conspicuously
consume).
2 comments:
Attack Rep. Sam Jones!
All the while, as clearly shown in the Sunday Baton Rouge newspaper headlines, the totally non-transparent Governor and his minions have been outright lying to the public!
Frankly, they have been caught in the act!
So, you and all his apologists quickly, and I mean quickly, change the subject and turn the light on some one else.
IT IS NOT WORKING ANY MORE!!!
News bulletin for Jeff: Louisiana doesn't have "leftist policy-makers." You're all just a bunch of backwards blowhards stuck in a timecapsule, using only slightly different racist dogwhistles about welfare that George Wallace used. As for tax "simplification" (love the euphemism), why should we trust the same group of charlatans who wrecked our economy and work to engineer more and more money from the poor to the wealthy? This is redistribution that Jeff-types seem to love.
As a note for the poor people reading this blog: anytime a shill for the right-wing (like Jeff) uses the phrase "a rising tide lifts all boats", you're about to be bent over the barrel. It means, supposedly, that we will take money from future generations and give it to our current rich ("job creators"), and then they will use their superior skills to make us all rich. That's why poor people did so well under Reagan and Bush, and why they did so poorly under Clinton.
Jeff will accompany the above sort of garbage with a bunch of crap about how the left is stupid to think that the wealthy have greater advantages and that special interests have more influence than poor folks. Why would anyone think that? Then there's also the (standard delusion from Jeff) belief that the left wing wants to "pick and choose" "winners and losers" and want to seize power to satisfy their communist redistribution scheme (and "buy electoral support"!). It's amazing to see such foaming at the mouth garbage coming from inside the bubble, where it must be really scary.
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