Having reversed Louisiana’s only major tax reform of the 21st century, Gov. Bobby Jindal and the Legislature should be explaining themselves in this election year.
They’ve made our tax system less economically efficient, more unfairly tilted to the wealthy, and more dependent on volatile sources of income such as sales taxes and oil revenue.
Tax reform ought to be an issue in this fall’s elections. But those repealing the 2002 tax reforms are the ones claiming success and attacking those who supported reform then.
Alice in Wonderland saw nothing like the dishonesty of agitation against the Stelly Plan.
The Stelly Plan was a sweeping package named for then-Rep. Vic Stelly, R-Lake Charles. Passed by lawmakers and voters in a 2002 constitutional change, the legislation eliminated the sales tax on groceries and residential utilities in exchange for increased income taxes on middle- and upper-income earners.
The tax increases were rolled back in 2007 and 2008 after a backlash against the income tax increases. The sales tax cuts, which benefit everyone, are locked in the constitution and cannot be easily reversed.
The net loss to the state of Stelly repeal: more than $600 million annually. Another result: Better-off income taxpayers got not only sales tax reductions, but whopping state deductions for high-end taxpayers who itemize on their federal returns.
Forgotten, or ignored, by the current crowd is that the Stelly Plan - pushed also by Jindal’s early mentor, Gov. Mike Foster - ended a series of annual or biennial crises over renewal of “temporary” sales taxes that had been on the books for many years.
The Stelly Plan has become something of a political football this fall. Lt. Gov. Jay Dardenne, R-Baton Rouge, voted for it when he was in the state Senate, as did Secretary of State Tom Schedler, R-Mandeville. They are criticized by their challengers. Billy Nungesser, the Plaquemines Parish president, is running against Dardenne and Speaker of the House Jim Tucker, R-Terrytown, running against Schedler.
Schedler, ironically, voted for repeal of part of the income tax portion of the Stelly Plan before he left the state Senate. Tucker was among those pushing Stelly’s complete repeal.
This is not a case of anti-tax slogans telling us who are the “real” conservatives. Repeal of the Stelly Plan was a huge step backward.
Jindal and lawmakers elected in 2007 don’t bear all the blame. The first measures to feed the backlash of the “haves” were passed and signed into law by Gov. Kathleen Blanco in that year. But the worst excesses in tax anti-reform were taken under Jindal.
Among his changes was the decision to revert to the rates and brackets in the income tax before enactment of the Stelly Plan. The governor and lawmakers did not even consider a thoughtful rewrite of the structure of the tax code itself. Instead, it just flashed back to the 1990s.
Cutting taxes is one thing. Cutting them without real thought is another.
Among the disreputable arguments against reform is that Stelly and his supporters did not tell voters that income taxes grow with the economy, and would over time generate more revenue for the state.
The initial Stelly tax “swap” was neutral, only replacing sales taxes lost with income taxes.
Stelly, of course, honestly described the future growth of income taxes. In fact, that’s why income taxes were used, because the state was too dependent on taxes - including sales, but also oil revenue - that can swing too rapidly up or down.
The vast majority of Louisiana families - middle-income included - got a net tax break under Stelly. Repealing it benefited the highest-income earners.
We hear arguments in tax policy about “class warfare.” Repeal of the Stelly Plan was class warfare against working families, with the stability of the state tax system as collateral damage.
The critics of the Stelly Plan should be the ones doing the apologizing this fall.