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Jindal courts political trouble with tax cut opposition

A few Louisiana senators fired a shot across the bow of the Gov. Bobby Jindal Administration when they passed Sen. Buddy Shaw’s SB 87 out of committee. The bill would move back up the income levels that push individual income tax filers into the middle (4 percent) and highest (6 percent) brackets to what they had been prior to passage of the “Stelly Plan.”

Interestingly, besides Shaw himself one of the more persistent advocates of passing the bill out, which moved essentially on a party-line vote with Democrats opposing, was Sen. Robert Adley, more known for his restraining such moves in the past. Last year, in committee he verbally chided Shaw’s predecessor for a similar but more far-reaching bill. This time, he went on the offensive against a representative of Jindal’s.

When the adviser, John Carpenter, averred that Jindal could not support the bill at this time, although he also said in a few weeks as the budget process moved forward it might become possible, Adley offered not one but two reasons why Jindal should not hesitate. First, he agreed with comments made earlier in the day and in this hearing by the Legislative Fiscal Office that another missed budget projection should create another surplus for this fiscal year, especially as oil and gas prices remained high (at present $30 above the oil prediction and $3.50 over the gas guess, which if maintained for a year would bring in an additional $450 million -- $12 million per buck higher for oil, $600,000 per cent higher for gas). He also suggested Jindal’s requested $307.1 million enrichment of megafund to attract business be used to pay for the tax cut, as he correctly noted greater economic development potential would come from that use of it.

Carpenter argued that any loss of revenue might not be good because of the large amount of “unmet needs” of the state, such as for roads, unfunded accrued liabilities in pensions, deferred maintenance, and the like. But if the Jindal Administration is following this path, it is threatening to box itself in a corner. That is, it makes Jindal seem he would rather give big business handouts than pursue those needs, or would sacrifice tax cuts to the people that, if anything, would do more for the state than the megafund boost. Worse, Jindal has operated under the assumption that leaving money in the hands of the people is what will cause economic growth, which will make it easier for government to tackle the “unmet needs;” observers will wonder why, when the opportunity presents itself, he did not practice what he preached.

Jindal cannot win this political argument, as Shaw, Adley, and others on the committee demonstrated. The public as a whole, and Jindal’s supporters in it in particular, hear Jindal talk about how creative and entrepreneurial forces must be unleashed in the people, yet when it seems a surplus presents itself that would allow the tax cuts to bring this about, he would rather spend it on worthy one-time matters, which is not bad, but what will be viewed very negatively is dumping $300-plus million into a fund that may not be used and even if it is will go to some large, out-of-state corporation, instead of returning it to the people. Perhaps most damaging was the Administration, on this issue, is seen as siding with Democrats who have fought against meaningful tax cuts and for larger government – which is not the constituency that got Jindal elected.

Expect advocates of tax relief both in and out of the Legislature – many of whom supported Jindal during the election – to use SB 87 to very publicly state their case. In that instance, Jindal has got to throw overboard the megafund boost (at least most of it, maybe leaving a token addition of something like $60 million) or he will lose a ton of credibility and political capital. The administration has roughly three weeks to come up with this exit strategy, when the Revenue Estimating Conference meets to declare another surplus, and it needs to get out ahead of the issue or else Jindal risks being viewed as a hypocrite.

The Jindal Administration has done well in its budgeting in its restructuring priorities and matching revenues to expenses for the long term. But its blind spot always has been the megafund. If this idea of an increase of the account didn’t exist, it probably could win an argument pitting unmet needs versus a tax cut. But it cannot be so beholden to that concept that it will pass on exceeding a campaign promise (the possibility of income tax cuts) and risk even be viewed as arguing against these in order to preserve the megafund addition. This courts political disaster far too early in Jindal’s short tenure at the top.

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