Search This Blog


Even with revenues woes, suspending tax cut bad idea

There is persistent talk that Louisiana should delay implementation of individual income tax cuts passed last year, and that now has an action plan associated with it with the filing of HCR 94 by state Rep. Michael Jackson that would suspend the cuts effects until probably the last week of August, 2010. This provides an explanation for past actions regarding the reduction and another opportunity to remind why this would be a bad idea.

The lowered rates actually went into effect at the beginning of this year for those employed who took a tiny amount of initiative. Typically, governments that levy income taxes create tables by which employers, charged with automatic withdrawal and remittance to the government for all but the lowest-salaried employees, use to determine what amounts are to be deducted. But the law curiously set a date of no earlier than Jul. 1, 2009 for the state to revise these tables, meaning workers had to fill out forms on their own to turn into employers to begin receiving any reduction beginning Jan. 1, 2009. While some have objected to this, it is not inconsistent with conservatism: conservatives believe that people, not government, should take charge of their own lives so to file the paperwork on their own was not too much of a burden to ask rather than be dependent on government to do it, in essence, for them.

But now another gambit to the delayed implementation has become clear: the state constitution allows both houses of the Legislature to pass a resolution suspending a law for sixty days past the adjournment of the next regular session by the same rule (in this case, majority vote) without any gubernatorial intervention. It could be the delayed implementation was a means by which to facilitate this strategy, as having fewer people actually receiving currently the break (with the remainder having to wait until income tax filing for 2009 in 2010) could mean less popular outrage at a suspension for reasons of financial exigency (as is stated in the resolution).

No matter, for three reasons this is a bad idea. First, lower taxes inevitably lead to economic growth which will mitigate revenue problems for government. But starting and stopping them not only delays the effect, it makes it less pronounced as the populace will become wary of the permanence of these cuts and therefore less likely to use the proceeds for economic development purposes, as caution will reduce their willingness to invest them.

Second, it siphons off pressure on elected officials to reduce the size of government. As is becoming apparent in the ongoing budget process at present, there is room for savings. Low priority or no priority jobs have been identified in state government, for example, and now are intended to be cut. Grabbing back the tax cut might take away the impetus to do that.

Third, it would intensify the immoral nature of the taxation enterprise in the worst way. Taxation is a necessary evil, but it does not become immoral until it happens for unnecessary purposes and disproportionately punishes some people. The point above would indicate that unnecessary purposes are being funded through deprivation of people’s liberty by seizing their earnings, and worse is that the suspension would cause greater injury to those who already contribute the most. As of the latest report (which makes compiling exact numbers difficult because it doesn’t break returns down into single or otherwise categories), about a third of income tax filers benefit for sure under the reduction – who already pay a staggering nearly 84 percent of all income taxes. Anything that allows that minority who pull the majority riding in the wagon most of the time a little more rest has a positive moral component to it.

Tough fiscal times for the state do not justify the temporary reversal of this tax cut, so let’s hope HCR 94 goes nowhere.

No comments: