Reduce bad surprises, stimulate growth by nixing corporate income tax

Because of the complexity of state government, the shortness of legislative sessions, and the culture of overregulation in Louisiana, at the end of any session a number of bills go forward that, simply, are great unknowns when it comes to their fiscal impact. A good example from this session is SB 259, and provides another reminder why the state should change drastically its corporate taxation laws.

This bill was designed to aid one firm to give it incentive to not transfer any or all of its operations elsewhere. But as the clock ticks to the end of the session later today, nobody is sure exactly just how many companies could claim this tax break. Worse, it might actually foist a higher tax bill on Louisiana-based firms. All that prevents its enacting would be a gubernatorial veto and Legislature failure to override, and its consequences still are not clear.

This rings typical of the confusing and confiscatory nature of Louisiana’s corporate tax code. Not only is its top rate the 15th highest of all states, but it also tacks on a “franchise tax” that taxes on the basis of the value of the firm (separate from property taxes, at the local level, paid on real property that in part makes up the value of the firm). Unlike all but one other state, part of this “value” includes debt. And then there are a dizzying variety of tax breaks for a multiplicity of purposes whose savings for corporations probably in part get eaten up by the cost of all the record-keeping to claim them (and does not include “special” taxes such as those upon forms of gambling).

SB 259 is just another one of these breaks. It would be so much simpler to get rid of Louisiana’s corporate taxation’s five levels, get rid of all the breaks, and just set a flat, low rate. Even better would be to get rid of a corporate income tax entirely; Nevada, Washington, and Wyoming do without any form of them entirely and are doing better than Louisiana economically. This reform would attract businesses, bureaucratic expenses to track everything for the state government would zoom downwards, and the effects of it (especially if at zero) would be easily predictable.

It’s not like eliminating corporate income taxation in Louisiana would be that big of a problem. For fiscal year 2003-04 its revenues constituted only about 5.75 percent of the general fund’s (little more than 2 percent of the total operating budget’s). The Revenue Estimating Conference “found” almost that $373 million in its last meeting last month. No doubt the boon of economic activity spawned by the elimination in short order would more than compensate for this forgone revenue.

But, of course, none of this was contemplated this session. Instead, by contrast, we get things like HB 795 which operates in reverse, granting the governor more leeway to establish more tax breaks. Most obnoxiously, it grants the governor the sole power to approve whether a corporation gets a break; there’s some good-old-girl behind-the-scenes preferment opportunities and horse-trading just waiting to happen under that arrangement.

It’s unlikely that the House will alter that provision in the next three hours, but one can hope. And to dream really big, maybe serious corporate income tax reform will occur during the next fiscal semi-only session two years from now, which may be two years too late.

Blanco, legislature do little this session regarding health care costs

It’s all over but the shouting, and almost nothing happened this legislative session to introduce necessary health care fiscal reforms that could save taxpayers hundreds of millions of dollars and/or vastly increase the level and amount of service to those using state health care resources.

On the budgetary side, Gov. Kathleen Blanco completely whiffed. Earlier in the year she talked of restructuring long-term care reimbursements to reduce the nursing home bias in provision and enabling more services to more people at a cheaper cost. She reneged on this when the state’s fiscal picture improved – in other words, like a smoker considering cutting back on the activity because of lack of funds, but then discovering some extra money and deciding to smoke up instead of kicking the habit.

(The Senate did add more money to fund the New Opportunity Waiver program to allow 50 more people to get home-based care. Whether it survives conference and passes Blanco’s muster remains to be seen.)

Bonus doesn't change facts about government-before-education politicians

Senate Democrats and some Republicans ran for political cover with an amendment to HB 842 which provides not a teacher pay raise, but a one-time bonus to school employees with teaching certificates. Further, it only goes to some, those whose districts will not be fully funded out of the Minimum Foundation Program formula that computes raises to meet the average raise amount. Only those districts which would receive only some or no additional monies required to go to raises (almost half) will have such monies given to them.

The formula is computed partly on the basis of “effort;” that is, districts, as determined by this complicated formula taking a number of factors into account, which, given these, put forth a maximum “effort” to get dollars to education get extra compensation. In short, the “lazier” districts get rewarded by this (but just one time).

What is most interesting about the unanimously passed amendment was the same Democrats who complained that the Republican plan to make for permanent raises would remove a $13 million payment to the unfunded accrued liability of state retirement systems suddenly had no qualms about doing the same to fund these bonuses. Sunday night, Democrats howled that this amount again could be saved by making this “extra” payment instead of giving it to educator pay raises; Monday afternoon, all these concerns miraculously vanished and it didn’t seem to matter.

Don’t be fooled by these gutless manipulators; they are no more interested in steering more funds to salaries today than they were over the weekend. What they are interested in is not being seen as the manipulators they are, users of teachers to wrench more money out of the people’s pockets and into government. Unlike most of the Republican senators and mostly Republicans in the House (indicated by this vote), the only genuine proof they can offer about raises is of taxes, not for educator’s salaries.

In the future, as long as the GOP keeps reminding the public of this, the majority of the public will see these government-before-education politicians for what they are. And that will include viewing Gov. Kathleen Blanco, sure to keep this provision in the bill if it reaches her desk, as the poser that she is on this issue.

GOP senators (mostly) for better education; Democrats favor big government

Legislative Republicans and Democrats showed their true colors in their decisions concerning separate amendments to the state operating budget – Republicans want to spend efficiently and give educators at all levels pay raises, while Democrats want to use educators to grab more of the peoples’ money.

The amendments, which differed only in the breadth and amount of the raises (one including school support personnel, the other not), called for cuts of enhancements (that is, money added to current spending) across the board of 1.36 percent from discretionary funding from the general fund. During the debate, a number of Democrats floated fictitious arguments, which were dealt with by the three GOP sponsors, Sens. Jay Dardenne, Tom Schedler, and Craig Romero.

FICTION: Sen. Francis Heitmeier said the removal of $20 million that would have gone to local school boards would punish education.
FACT: The $20 million simply would have been rerouted into salaries away from bureaucracy. Already a resolution has been passed requesting that 65 percent of funding for education go into teachers’ salaries; Louisiana only gives out about 60 percent.

Hightower: Shreveport's Louis XIV

You must hand it to Shreveport Mayor Keith Hightower when it comes to persistence. If the facts don’t fit his idiosyncratic worldview, he either changes them or dispenses with them entirely. He gives us another example of this in his latest comments regarding state Sen. Max Malone’s amendment to the capital outlay budget which prohibits use of $12 million authorized by the state to be used to build a convention center hotel until litigation is settled and a public vote on the project occurs.

Says Hightower, “It's just politics. It's not politics for Shreveport. It's a political agenda, and it's bad politics.” What he seems to mean here is he believes Malone is pursuing a political agenda against Hightower, while Hightower equates his agenda with Shreveport’s. In fact, Malone has been very consistent in stating the reason behind his opposition the hotel, that such a huge capital expenditure ought to have the vote of the people, and if it fails to pay for itself, then only the people have themselves to blame.

More than once Hightower has said he doesn’t fear such a vote, even though the only reliable public poll ever taken on the idea (now around nine months old) showed 76 percent were against the idea. He has argued taking a vote would slow things down too much. Buying this for the moment, then there’s another, simple solution to the issue: if the amendment comes to pass and Hightower still does not want to bring it to a vote, just sell $12 million more in bonds to bring the total city commitment to $52 million (which would also render moot all lawsuits). As stretched as Shreveport’s bonding capacity has become under Hightower’s reign, it still can afford this.

Yet Hightower instead rants and raves about Malone’s actions instead of calmly proceeding to the next step. If Hightower were as confident in the hotel project as he projects, what’s the difficulty in selling $12 million more? His rhetoric, in fact, suggests no understanding whatsoever not only about Malone’s motives, but any genuine grasp about the reality of the situation:

"I'm once again amazed that Max Malone is trying to take state dollars from Shreveporters," Hightower said. "In effect, he's worked the entire session to take things from Shreveporters and, to my knowledge, has not delivered anything. To take $12 million from us is absurd, and I hope the voters take him to task over it."

First, Hightower doesn’t seem to understand that the $12 million is not “Shreveporters’,” it is a gift from the taxpayers of Louisiana for a particular purpose which, quite frankly, Hightower does not seem to be following (the purpose of the lawsuit). Neither is Malone “trying to take,” he is just suggesting conditions by which the Legislature and governor may institute to safeguard state taxpayers’ monies. (Note that, per capita, about 5 percent of that money actually is Shreveporters’, the proportion they will have to pay in to pay off the bonds backing it, so in essence Malone is helping to protect Shreveporters. Also note that Hightower’s phrasing of “take” means he implies a public vote would result in a defeat, preventing that money from being used. What does he really believe then, this or his rhetoric that a vote would bring approval?)

Second, the next sentence probably refers to Malone’s bill SB 333 which changes the selection of members to the Caddo-Bossier Parishes Port Commission which would leave Shreveport officials with fewer unmediated choices to the board. This is good legislation but since in Hightower’s mind everything is about him, that any legislation that impacts his policies negatively must be directed against him because others are against him (isn’t there a word for this?), he can’t help but call it negative. This sentence also reveals Hightower’s thinking about the nature of government: to him it is all about “bringing home the bacon,” not serving and leading the governed. By contrast, Malone’s voting record has shown he is more interested in making good decisions for the people, rather than putting his name on plaques.

Third, the last sentence belied the political mentality of Hightower: a pure politician looking for the next office to hold. That explains why he assumes Malone, who is term-limited in the Senate, is running for something again to create the situation where “voters take him to task over it.” Much more likely, were Malone to do something like run for mayor, voters would thank him for protecting their interests and pocketbooks from Hightower. And the real eye-opener here is the idea of “taking $12 million from us,” as if it were Shreveport’s to begin with (not the state taxpayers’) and that his policy, despite the poll numbers, actually stands for “us.”

What seems to sum up Hightower’s political worldview is “L’État c’est Moi.” Rather than trying to provide leadership through persuading the public and all policymakers who count and/or by following the will of the people, Hightower believes that he with inerrancy determines what is good and bad for the people, that he is they. Only that attitude can explain his remarks on this subject – an attitude that performs a great disservice to Shreveport on this, and potentially many other, issues.

Sick tax passes because senators say one thing, do another

With 14 Republicans, who usually are against bloated government and unnecessary taxes, in the Louisiana Senate, at least one would have to defect for the sick tax HB 887 to pass. In fact, because a couple of Democrats were expected to vote against it, more would be needed. When all was said and done, Sens. Don Cravins and Nick Gautreaux broke against the tax raise, while Sen. Rob Marrioneaux found reason to absent himself (which is as good as a nay). For it to pass, therefore, five Republicans had to defect – and they did, Sens. Walter Boasso, Sherri Smith Cheek, Ken Hollis, Mike Michot, and Clo Fontenot, allowing the state to reach further into the pockets of health care consumers and insurance payers 26-11.

Cravins’ previous comments and Gautreaux’s failed amendments (to introduce more transparency into the tax and to redirect some monies to rural hospitals) presaged their opposition. Boasso was somewhat of a surprise to support it (although his testimony during amendment consideration made his position clear), while Fontentot was rumored to be shopping his vote around for pork, Hollis’ past voting record, Michot’s running a medical equipment company, and Cheek’s close relationship with the health care industry almost made their votes predictable.

But if one GOP defector would have to be singled out as the crucial vote, the one whom the interests that favored this bill invested in and got a payoff in the form of this passing, it would be Cheek. She has a history of talking as if she favors more efficient health care spending but her actions show, as in this case, that instead she would rather confiscate more money out of the people’s pockets. Her activities relative to other bills this session testify to this, and even on this tax she has said one thing and done another:

Blanco, not conservatives, fails state education

Bitter to the end, Gov. Kathleen Blanco’s comments about the failure of her cigarette tax for teacher raises/health care/whatever demonstrates why she continues to prove she is not the right person at this time to lead necessary reform of state finances and education.
Blanco made remarks at a press conference, and showed she still does not get it:

I know that thousands of educators and parents across our state are bitterly disappointed that a willful, obstructionist group sided with cigarette vendors and against our teachers and against our children.

First, I’m an educator and nonsmoker, and I’m delighted that state government is not going to be able to confiscate more of the people’s resources. Second, this “group” did not side with “cigarette vendors” and against “teachers” and “children,” it sided with lovers of liberty and against the big government liberalism that is at the heart of Blanco’s political philosophy.

Never forget that while Blanco may make some efforts to promote more efficient government, she does not at all believe in the concept of smaller government. Like her liberal friends, she wants more and more money sucked from the people into government so she can accumulate more power and do more things. She is no different than federal prisoner #03128-095 in that way (although, quite fortunately, she appears to be a whole lot more honest).

And because she is so blinded by her ideology, by her love of big government that, according to her rhetoric, she seems unable to understand the nature of the opposition. Thus, she rails about “profiteers” being aided by “conservatives” to create a “shameful victory.” No, it was a glorious victory for anybody who believes in the philosophy that government that governs the least governs the best, because the resources already are there for teacher raises without any raising of taxes.

This sentiment that “obstructionist” Republicans, plus a few Democrats, defeated the efforts to bring about the raises, is pure fiction because of the amendment on the operating budget bill to put teacher pay raises in the current budget, rather than contingent on a tax increase. The amendment barely lost, but one word from Blanco at that time would have reversed that outcome. Simply, Blanco refused to support educators when it counted the most.

Especially egregious here was that money existed so that no cuts would have to be made; this was after the state had gotten recognized much more funding. But Blanco’s response to this at the time? Most of the money should be used to plug a hole in health care. Yet if that was the case, then why was the sick tax necessary? Will Blanco’s appetite for more money to state government ever end?

There is still time for the Senate to amend the operating to stick in these raises. (If she wants to find a more-permanent revenue stream to back them, she can try health spending or slush fund reform.) Again, all Blanco has to do is say the word and she can muscle it through. Whether she does will determine if she really does support teacher pay raises or that she fails to support education in the state.

Despite some history ignorance, faculty do try to do their jobs

There is another instance in which I feel I should address a column written by somebody, falling under the same rubric as a posting last week to reassure the public that not everybody in academic is so bereft of actual knowledge and logical thinking that state taxpayers and those paying tuition aren’t throwing their money away. This is when a college student makes us look like we haven’t done our jobs.

Justin Shatwell gives us such an unfortunate example. Had he submitted this column about judicial activism as an answer to a question on one of my American Government exams, it would have been clear he neither paid attention to the lecture or textbook materials about the American judiciary and system of government.

In the column is a ton of ignorance about the views of the Framers of the Constitution about the role of the judiciary (easily researchable through the Federalist Papers), stunning naïveté concerning judicial philosophy and behavior, a failure to understand the concepts of popular sovereignty and control of government, and a misunderstanding of the relationship between law and morality.

One wonders whether Shatwell has any inkling of the nature of the present American judiciary:

The higher echelons of the judiciary are appointed, not elected, and are given lifelong terms so that they can rise above politics and do their jobs honestly. They are not expected to bow to the whims of the majority. Rather, it is mandated that they answer only to justice.

Actually, all of the federal judiciary (legislative courts aside) is appointed. Lifelong terms may allow judges to “rise above politics,” but simultaneously, conditioned only by the threat of impeachment (which is so difficult that it seldom occurs and not in the twentieth century for policy reasons), it also allows them to substitute in their own agendas. Even if in substituting their own agendas judges think “they answer only to justice,” it is their idiosyncratic version of justice, not some universally-agreed upon standard of it. In short, judges therefore become policy-makers, a view that ran completely against the grain of the Framers' intentions that the judiciary only settle disputes.

In fact, the Framers made it clear that the “majority” should always control the judiciary. This is why they gave Congress, elected by the people (both chambers directly since 1914) the power to change the jurisdiction of any court, in addition to the power to impeach (as well as several others – Senate confirmation of judges, funding of the judiciary, etc.). It shows absolute ignorance to argue otherwise.

But probably the most incredulous statement is that the Framers "entrenched the judiciary so that it could fight injustice from every source, including the will of the people."

This is nowhere near to what the Framers thought (indeed, this statement is contradicted in Federalist #78). Because the Framers saw men and their institutions as fundamentally flawed, they harbored no illusion that any institution, including the judiciary, could be designed to produce "justice." Instead, by the use of separation of powers and checks and balances, they sought to minimize the destructive power of government controlled by a faction by countering "ambition with ambition," giving flawed groups the ability to keep each other under control, maximizing the chances that only things seen as beneficial by enough interests could become policy.

Shatwell turns this philosophy completely on its head. His view destroys the very notions of checks and balances and separation of powers. He seems to believe judges are Platonic guardians, a super-legislature wise beyond all other policy-makers who somehow put aside politics and rule in the best interests of everybody, a view completely at odds with the fundamental philosophy behind our government.

He cannot even support his thesis by arguing the judiciary always is right. While the federal judiciary did empower the federal government to intervene in a state function in the case of desegregating education, a policy now virtually universally accepted, only a decade earlier the court essentially declared the Pres. Franklin Roosevelt’s internment of Japanese-Americans was perfectly constitutional, a move now almost universally condemned. So how can the judiciary be such an institution immune from criticism, an institution which makes these incredibly wise decisions, when it makes such stupid ones from time to time? Obviously not, because it’s not what Shatwell has invested in it.

Once again, please do not judge what is going on in academia by the remarks of somebody identified as a senior history major who obviously has learned next to nothing about the history and philosophy behind our Constitution. Believe me, some of us really are trying to educate, and many of our graduates do emerge with genuine knowledge and an ability to critically appraise it.

Health priorities show why state does not have a revenue problem

On the new tax issue, since the legislative session Gov. Kathleen Blanco has shown an amazing ability to talk out of both sides of her mouth. Before the session, she said there needed to be a tax on hospital for health care funds and a tax on cigarettes to fund teacher raises; otherwise, there would be no money for either. Presto, revenue estimates soar around $360 million, so there’s no need for any new taxes, right? Wrong, Blanco still insists on them.

She finally wins the hospital battle by getting a new tax on their revenues which largely will be passed along to consumers and ratepayers. So no more new revenues are needed for health care now, right? Wrong, Blanco now says the cigarette tax should go to health care, too (while winking and saying it’s really going to teacher raises).

For Blanco, she acted this way not just on new taxes, it’s also been the fiscal situation of Louisiana’s health care system. At the beginning of the session, she was saying she would bring more efficient use of health care dollars to the system, the major part of this a proposal that nursing homes not receive their long-standing favorable budgetary treatment that would save $60 million, receiving plenty of backing from Legislative Auditor’s reports that showed if Louisiana had similar standards as other states, almost $100 million a year could be saved.
Yet when the new revenue estimates came out, she suddenly backed off this.

To her credit, she has provided verbal backing to HB 697 which would allow reduced utilization of nursing homes in favor of more community-based care for the many users who could have needs met at a far less expensive per patient rate to the state. At least she’s not trying to reverse it like state Sen. Sherri Smith Cheek who also has provided some verbal gymnastics in the area of health care financing.

Cheek, who sits on the Senate Health and Welfare Committee and on the Joint Legislative Committee on the Budget, giving her large influence over health care spending, in her campaign and first year in office talked a great game about reform. But this session, she has done things that suggest rather than a commitment to taxpayers and patients that she would rather carry water for nursing home interests.

She got her committee to pass SB 253 which would enshrine into law the very formula that inefficiently uses Medicaid dollars to reimburse nursing homes, which would require a majority of the legislature to change. Fortunately, it looks dead for the session as since Blanco wisely said she would not support the bill without changes.

Then Cheek tried to throw nursing homes another bone concerning HB 697 by proposing an amendment in Health and Welfare to take much of the de-institutionalizing aspect out of it. Fortunately, other senators who have shown greater commitment to reform this session raised enough ruckus to get even nursing home owner and panel chairman Sen. Joe McPherson to back down with Cheek.

With health care taking up the largest single portion of the state operating budget, as long as we continue to have legislators with Cheek’s mindset on this issue in Baton Rouge, somebody with the mindset of Blanco’s on taxes is going to keep pushing them, successfully. It’s not a revenue problem we have in this state, it’s a spending priorities problem.

Blanco new tax strategy: they are all for "health care"

As bad as Gov. Kathleen Blanco’s logic has been in arguing for all sorts of tax increases, her way of going about it has made even less sense – and for more hypocrisy.

To review, first she links an increased revenue source, higher cigarette taxes, based on an activity tied into health concerns, on a teacher’s raise. It’s a tax increase that would affect a minority and is based on voluntary usage. But then for health care, she comes up with a much broader-based tax which is much less voluntary in nature, as in one form or another it will be passed on to consumers and ratepayers. She then strikes first with the second tax, instead of the intrinsically easier tax to pass (because it affects fewer people on a voluntary basis).

It would seem to make more sense to go for the easier one first, but several considerations came into play. First, the sick tax had the support of a portion of those being taxed, because they see the opportunity not only to pick up more federal funds with it but also because they know they can palm off much of tax increase (indirectly) on consumers. Second, health care is considered a much more pressing need that raising the salaries of underperforming educators. Third, as illogical as it is to connect smoking to education raises, it’s even more perverse to connect hospital revenues to these raises.