In arguing for sales tax increases, Democrat Gov. John Bel Edwards broke a campaign promise not to raise any taxes, but said he had to ask because he didn’t know things were that bad when he took office – despite that he had served as his party’s chamber leader and voted for the majority of budgets that he relentlessly criticized. Thus, he justified (version 1.0) increasing taxes as needed to resolve budgetary shortfalls. As it turns out, maybe things weren’t as bad off as to need the largest tax increases in state history.
That’s because, when all was said and done, revenues came in $122 million higher for fiscal year 2017 and $308 million higher in FY 2018. The one percent sales tax increase, assisted by smaller ones on tobacco and alcohol and from reductions and eliminations of other tax credits, brought in an estimated $1.761 billion over those two years. Upon its expiration, over objections from most legislative Republicans, 0.45 cents were retained for FY 2019-25, which should have generated $463 million this year.
So, when the official FY19 revenue calculation lined up for the Revenue Estimating Conference to recognize in a few weeks came in at $500 million above that used for budgeting, that proved Republicans, particularly those in the House of Representatives, correct in stating that a dwindling rate of increase should have been approved, if any at all. This has sent supporters of increased taxes scrambling to find a justification to keep any of the increase even accounting for existing programs and new commitments, such as pay raises for school personnel.
Version 2.0 found life right after announcement of the surplus. GOP state Sen. Rick Ward basically said, “so, what?” and offered a theory that the extra money served a lot of other purposes. Upon declaration of a surplus, the amount may be spent only on certain nonrecurring items, such as capital projects, debt reduction, offsetting underfunded pension systems, and tucking it away into the Budget Stabilization Fund.
Ward refused to call the surplus a windfall, and instead argued that plenty of need existed among nonrecurring items. However, this approach is disingenuous, if not dishonest.
When legislators like Ward voted for the sales tax increases, they told the public it was for certain purposes – which didn’t include the likes of extra capital outlays or BSF replenishment. To justify hanging onto a mechanism proven to take too much from the people beyond the purposes promised displays a lack of leadership and political courage. A genuine leader wanting permission to fund things like capital outlay would have asked for tax increases for appropriation for those purposes, instead of trying after the fact to reach for any reason to keep taxing too much.
Version 2.1, presented shortly thereafter by Commissioner of Administration Jay Dardenne (who, as a gubernatorial candidate did say he would raise taxes if necessary), used a variant of Ward’s “we-didn’t-mean-it-but-now-that-it’s-here” defense, saying the excess could go to the Budget Stabilization Fund. “We are not completely out of the woods on replacing one-time money that was drained in the previous administration to meet operating needs,” he explained.
Dardenne’s one to talk. The Edwards Administration has depleted the BSF by $148 million through FY 2018, with the fund at the end of last year around $321 million or about a third of its legal maximum (set at four percent of total annual receipts). He should get his own house in order before blaming others and stop the hypocritical echoing of Edwards that he has brought alleged “stability” (contradictorily in using a temporary tax) to the budget process by not using one-time money.
Regardless, he uses the same illogic as does Ward. If he and his boss were honest, they would repeal the sales tax increase; then, if they truly want to pump up the BSF, either find other monies to do so or argue for a tax increase with that purpose as the justification.
And Dardenne lapses into even more simpleminded rationales. He said the extra money came about accidentally, by federal tax cuts – note this policy taking the opposite approach of tax increases stumped for by Dardenne and his boss – which reduces the tax shield on Louisiana income and caused, he admits, increased economic growth that also helped generate revenues. That being the case, this means the answer is to adjust to changes in federal tax policy that does no harm to Louisianans; i.e., if a change in federal tax policy increases taxes on Louisianans because of state law, change state law to prevent that.
The irony of it all seems to escape Dardenne as well. He and Edwards argued against that state provision allowing partial writing off of federal tax liability in tax changes proposed in 2017 that would have raised taxes generally on individuals and corporations. But with that tax hike accomplished in another backdoor way despite having formally disavowed it, now they’re loath to give any of the people’s money back to them.
Version 2.2, launched by Edwards in the first televised gubernatorial debate, expands upon this greedy attitude. During it, he said that, despite the surpluses, the tax increase shouldn’t be rolled back, arguing that it would take years to confirm that the surpluses would continue.
This is rich. Official REC forecasts registered a small surplus in 2009 with large tax cuts halfway through, that dived into a large deficit in 2010, followed by a small one in 2011, a larger one in 2012, reversed into a larger surplus in 2013 that melted into a small deficit in 2014, followed by a small surplus in 2015, then got a boost of tax increases plus Edwards’s first draw on BSF funds that produced a small deficit for 2016 which incorporated the massive tax increases somewhat pared back in 2018, and the surpluses have rolled in since – the highest since the “false economy” of FY 2007-08 spurred by spending massive amounts of federal recovery dollars from the hurricane disasters of 2005 and huge budget cuts for FY 2006. In fact, over the past 15 years, Louisiana never has had a sustained three-year period of such high surpluses.
And Edwards wants to wait how many years for confirmation that deficits won’t return, all the while taking more of the people’s money than necessary? Maybe because he knows Medicaid expansion – which will cost taxpayers over $200 million a year extra and climbing that even a tax increase on the sick, health insurance policy-holders, and taxpayers generally can’t make up – is going to blow up over the coming years? If so, the answer is not to take more of what people earn under false pretenses but to reform expansion by introducing personal responsibility measures that will bring in tens of millions of dollars in offsetting revenues and discourage overutilization – measures that Edwards once claimed he supported but has refused to back (some of which he could pursue unilaterally without the necessity of legislation).
All in all, those like Ward, Dardenne, and Edwards remind us of the attitude of the Soviet Union’s communist leadership until its waning days concerning command and control over other states. Any territory that fell under their domination they considered eternally theirs, while any of the non-communist world’s was up for grabs.
Same thing with these statists and the people’s money, by their own words. Any resource taken from the people, no matter how accomplished, they consider government’s, and they will use any excuse to try to justify their disingenuous methods to retain that. And, rest assured, to them anything else you have left continues to be up for grabs.
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