Unserious fiscal paper puts agenda before value
Just as inevitably the first couple of transition team reports for Gov. John Bel Edwards looked to lead the coming bunch in sensibility, when it showed up the one concerning fiscal matters kept its promise as the least serious of all to come.
You know when a document thanks several organizations and individuals for expertise in its report and singles out by name, among the government agencies and interest groups and academicians, the rancher, mega-landowner and royalty recipient, and insurance agent Public Service Commissioner Foster Campbell, that the proposal has diluted its gravity with politics and ideology. Campbell, who has no expertise in economics or fiscal matters but who led the group as a co-chairman, likely got the mention because of his herpetic pushing over the decades of the tired and discredited notion of an oil processing tax to replace the severance tax that therefore naturally had to find its way into the document.
The facile populist belief behind it maintains that some alleged surplus profits of oil companies plus the 98.5 percent of the country that resides outside of the state would pay for it, forgetting that state concerns consume a much higher proportion – at least 28 percent – of the processing maximum and that the tax gets passed along to consumers. That such a measure would go into effect in era with low worldwide prices putting on the ropes the industry in Louisiana and, as a result of the soft market, excess refining capacity brimming outside the state makes it not just a stupid idea, but absurdly so.
Yet plenty of other material in its pages serves to covey the unserious nature of the effort. For example, in its discussion of tax reform, it exhorts any changes to make the system even more regressive than already – even though, according to a metric created by the leftist Institute on Taxation and Economic Policy, the state ranks 19th most “fair” (progressive) and that in reality its regressive elements, such as the nation’s highest homestead exemption (which increases local demands for revenue sharing), the state sales tax exemption on many items for individuals, and the Earned Income Tax Credit (despite which the committee recommended for an increase) cause major drains on revenues.
In fact, it contains one recommendation that would make the system more regressive, increasing the range of items subject to sales tax, a broadening of the contribution of the sales tax in revenue-raising once blasted by Edwards as a legislator. It also included another regressive item, a useful recommendation to exclude a certain initial amount of the base value of immovable property from the homestead exemption, as previously but unsuccessfully pursued in the past.
Very disappointingly, even as it cites efforts by both the Louisiana Association of Business and Industry and the Committee of One Hundred on this topic as references, it dismisses many good ideas from these reports. For example, the LABI report makes extensive recommendations on restructuring fee revenue with an eye (besides bringing increased rationality to this structure) towards shuttling more of that money to spending items of higher priority, while the committee’s document essentially ignores that.
That omission echoes a larger theme of the report: it focuses too much on trying to scrape up money and not enough trying to use it smarter and at an appropriate amount. Stunningly, it cites as a problem in need of surmounting that “Louisiana voters have been told that all is well and that government can continue to provide critical public services without any need to increase the revenue required to fund those services” – even though state and local governments have a demonstrable spending problem where if Louisiana just spent at the same per capita level as similar states it would run a surplus next year of $3 billion. Despite that fact, the document alleges the state cannot sustain much more in the way of cuts.
In conjunction with that, it claims few efficiencies remain to curtail spending. For example, it advocates a hike in gasoline taxes, even though transportation dollars could go much further in reducing the road construction backlog with different prioritization without raising the price at the pump, as Louisiana already ranks 13th among the states in per capita road expenditures.
So despite its lip service that revenue increases should come after spending reductions, recognize this exercise primarily exists to excuse tax increases to feed the monster. It’s ideological cover to use a crisis to inflict more harmful than good fiscal policies on Louisiana.
It does endorse some useful technocratic changes in addition to a few other specific beneficial proposals. Yet recognize that the end product serves more to pursue an agenda than to provide valuable advice to deal with Louisiana’s fiscal situation going forward.
Posted by Jeff Sadow at 10:25