Congressman Ralph Abraham has made cutting taxes a central part of his campaign for governor this year, and he is embracing the GOP tax cut he voted for in Congress in 2017 as a model for Louisiana, dismissing its effects on the national deficit.
Abraham has not outlined a specific tax plan, but he has called for eliminating the state’s franchise tax and inventory tax, as well as generally lowering corporate income taxes and sales taxes and creating a flat personal income tax.
At the same time, he promises to boost spending on roads, bridges and education, and vows to avoid the “death by 1,000 cuts” endured under former Gov. Bobby Jindal. That has drawn fire from Democratic Gov. John Bel Edwards, who argues Abraham's plan doesn't add up.
To reconcile those two positions, Abraham says the economic activity generated from cutting taxes would result in more revenue coming into the state coffers, or in other words, that the tax cuts would pay for themselves.
“Look at what it's done on the federal level. I was very pleased and honored to vote on the Tax Cuts and Jobs bill,” Abraham said in an editorial board meeting with The Advocate on Thursday. “Look at the jobs. We have 7 or 8 million that we can't fill. Because the jobs are there. It does work.”
The Tax Cuts and Jobs Act, passed by Republicans in Congress in 2017 and signed by President Donald Trump, reduced the top corporate income tax rate from 35% to 21% permanently and lowered individual income tax rates temporarily, among other changes.
The nonpartisan Congressional Budget Office forecast the tax cuts would indeed boost gross domestic product and grow employment and investment.
It also projected that over 11 years, it would add $1.9 trillion to the federal deficit – after taking into account the economic activity generated by the tax cuts. That economic activity shrunk its effect on the debt by about $550 billion, according to the CBO. In an August report, the CBO found federal revenues fell short of projections by about $8 billion in 2018.
Louisiana’s Legislature, unlike the federal government, is not allowed to run a deficit, meaning if the state cut taxes and revenues fell, lawmakers would have to find areas of the budget to cut or raise taxes to make up the difference.
Louisiana dealt with repeated budget shortfalls throughout Jindal’s second term and part of the first term of Edwards. Those shortfalls happened because of a combination of tax cuts passed under Jindal and former Gov. Kathleen Blanco, as well as generous tax breaks for corporations and a downturn in oil prices that led to a statewide recession.
Abraham dismissed the idea that cutting taxes here would lead to budget shortfalls, saying he’s talked to economists and tax attorneys who say economic growth would exceed the loss in revenue.
“We're talking about tens of thousands of new employees in this state paying into the system, it more than makes up for the tax cuts we would give them,” Abraham said.
Critics of such arguments also point to Kansas, which under former Gov. Sam Brownback conducted what he dubbed an “experiment” that involved eliminating state income taxes for owners of pass-through businesses, eliminating its top tax bracket and cutting rates. Job figures fell well short of Brownback’s promises, and a bipartisan coalition of lawmakers later overrode a Brownback veto to reverse the tax cuts after repeated budget shortfalls, according to the Kansas City Star.
Abraham said he’s spoken with businesses who are ready to invest in Louisiana but are wary of the state’s tax structure and legal environment. He said within 12 to 18 months of cutting taxes, state revenue would increase because of job growth.
The congressman has run for governor primarily on an economic message, arguing Edwards’ policies have stymied job growth. Edwards, meanwhile, argues Abraham would represent a return to Jindal's tenure. Abraham said Thursday he does support tax cuts and other "Republican conservative tenants" embraced by Jindal but he said he would not run for president like the former governor did at the end of his term.
Abraham also said he would embrace tax breaks for businesses as a way to lure companies here.
“We're going to incentivize businesses to come,” he said. “If that means tax credits, absolutely, because that means jobs.”
Abraham will face off with Edwards and businessman Eddie Rispone, along with three lesser-known candidates, in the Oct. 12 jungle primary. If no candidate wins more than 50%, the top two advance to a Nov. 16 runoff.