Search This Blog


Session conditions sabotaged real tax reform

Opining about attempted tax reform during the recently completed, underachieving 2018 First Extraordinary Session of the Louisiana Legislature, failed comedian and Republican state Rep. Kenny Havard lamented, “We didn’t even try.”

Of course not. If anything, the session’s design subverted that task.

Havard’s predilection for government spending more usually puts him in league with Democrats, and around the House of Representatives several from that party during the session complained that GOP plans to address a potential fiscal year 2019 shortfall rested on a partial, temporary extension of the 2016 sales tax hike. They said not to pursue a permanent tax increase did not achieve “tax reform.”

But the session call, authored by Democrat Gov. John Bel Edwards, purposely did not lend itself to accomplishing tax reform, much less the larger goal of fiscal reform. It included a narrow range of options that prevented any meaningful comprehensive reform from occurring. Further, state government has next to no information concerning an important reform option: which of hundreds of exceptions to keep and which to jettison.

Finally, Democrats in particular hopelessly conflated tax reform with tax increases. Ideally, tax reform must operate as the end, not as a means to a different end of separating more money from its earners, staying revenue neutral insofar as changes to marginal rates and exceptions. Broadening the base while lowering rates and slashing bureaucracy and regulation would produce tax revenue growth organically, not through taking a greater proportion of what people earn but by spurring increased economic activity.

Unfortunately, the latest study attempting to chart a path to such reform bought into the ethos of tax reform as a bridge to taking more of the people’s money. While it makes some good suggestions, this underlying philosophy contaminates its usefulness as a holistic tool to pursue genuine tax reform. And, because it never addressed structural spending reforms, it’s next to useless as a guide for fiscal reform.

Nonetheless, Democrats held it out as a model worth following – particularly as it argued for permanent changes. They argued that the expiring sales tax hike should had bought time to implement the report’s recommendations, thus extending it temporarily made no progress towards “tax reform.”

Again, this presents an entirely disingenuous conclusion. As genuine reform must incorporate revenue neutrality and not serve as an excuse to raise taxes, given the scope of the session call, time frame, and lack of information about policy options, it would have been reckless for the Legislature to make permanent changes under these conditions. Altering the tax code in this fashion and terming it “reform” is like painting stripes on a horse and calling it a zebra.

Given the circumstances, a temporary tax extension would do the least harm to the economy and body politic. That may not please those who disdain comprehensive fiscal reform and desire inflated government, but neither do they have the best interests of Louisianans at heart.

No comments: