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For his agenda, Edwards games tax cut impact

Looks like Louisiana’s Democrat Gov. John Bel Edwards is going for broke in his quest to turn back the clock on the state’s fiscal practices.

Edwards attempt to forestall right-sizing of state government hinges on finding new revenues to support a bloated state sector. Trumpeting budget deficit after budget deficit best accomplishes this objective. Thus, any organic creation of new revenues – i.e., a larger tax haul without raising rates or scrapping exceptions – puts a dent in this plan as it reduces the deficit, relieving pressure on instituting permanent new revenue sources – particularly his preferred progressive income taxation especially on corporations or fewer exceptions where the bulk of newly-unshielded dollars would come from transactions disproportionately undertaken by higher-income entities.

Thus, his administration has tried to throw cold water over the beneficial impact tax cuts passed the Republican-led Congress and signed into law by GOP Pres. Donald Trump would have on the projected fiscal year 2019 budget for Louisiana. Reviewing those changes, and only partially, the Edwards Administration said it would mean a boost of $200 million to $250 million for FY 2019. That covers only individual income tax collection; the Administration has abjured from estimating the impact that corporate tax cuts would produce, so the figure could go much higher.

But the Administration points out that the individual income tax changes’ impact for this year should show up in the latter half of FY 2019, when tax filing for this year occurs. It claims it passed on trying to gauge the corporate income tax changes from the complicated nature of such calculations.

These are just excuses to delay recognition of revenues. That latter input will start contributing prior to the July start of FY 2019, which almost certainly would narrow the deficit calculation for this spring’s budget-building. And the former could begin this year, with the Internal Revenue Service already planning to change its withholding tables at the beginning of February, if the state did the same.

Logistically, nothing prevents the state from doing the same, which would have the effect of enlarging the amount of money deducted from Louisianans’ paychecks. While no politician likes that, it becomes a case of pay me now or pay me later: tax bills go up in either 2018 or 2019 – and 2019 is an election year, so it would seem electorally to make more sense to take the medicine now.

Yet Edwards want to hold off because he holds out for what he thinks will best aid his reelection chances and lock in the oversized state sector: permanent state tax increases borne heavily by corporations and middle class-and-above individuals. By claiming to solve a chronic deficit in partnership with the Republican-led Legislature, forcing it to share responsibility for the tax hikes, he would take minimal blame for causing these while reaping the reward of allegedly saving the state from fiscal doom. Better, by holding back withholding table changes until 2019, income tax increases from federal policy changes gets lost in the shuffle of the other state tax policy adjustments.

Edwards does take a risk. If the Legislature forces him into no tax increases this year with furthering paring of government, or into swallowing a broad-based, proportionate tax increase such as renewing all or part of the temporary state sales tax fixing to roll off at the end of June, he largely fails to maintain inflated government and becomes known as the governor who increased permanently sales taxes on lower-income individuals and income taxes on all others (even if federal tax policy triggered that), right during his reelection campaign.

However, Edwards seems willing to go for it. Understand that his real reluctance to want incorporating the variable of corporate income tax change impact and altering individual income tax withholding tables now in predicting the deficit comes as a product of campaign strategizing and agenda advancement. Nothing must stand in the way of his turning back the clock, and reelection makes that easier still.

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