Friday, April 12, 2013

Louisiana Governor Bobby Jindal Ends Plan to Eliminate State Income Tax and Increase Sales

What – Raising Taxes on the Low and Middle Income Groups to Fund Tax Cuts for the Wealthy Isn’t Popular?

There was great fanfare in the conservative media outlets weeks ago when Louisiana’s Presidential wannbe Bobby Jindal decided the thing to do was raise taxes on working families to pay for a tax cut for the wealthy.  Jindal proposed completely eliminating the state’s income tax, and making up for the lost revenue by raising the sales tax rates.

Here is the Wall Street Journal gushing over his proposal.

Then there's Louisiana Governor Bobby Jindal, who wants to zero out his state's income tax (top rate 6%) and the 8% corporate tax and replace them by raising the state's current 4% sales tax. He would also eliminate some 150 special interest exemptions from the sales tax, including massage parlors, art work and fishing boats.

As an economic matter, this swap makes sense. Income taxes generally do more economic harm because they are a direct penalty on saving, investment and labor that create new wealth. Sales taxes, by contrast, hit consumption, which is the result of that wealth creation. Governors Jindal, McCrory and Heineman cite the growing evidence that states with low or no income taxes have done better economically in recent decades compared to states with income-tax rates of 10% or more.

The only problem, reality set in.  Voters having just digested the lessons of the last national election are not in a mood to do more for the ultra wealthy.  So Mr. Jindal, facing an embarrassing defeat has quit the program.

“I realize that some of you think I haven’t been listening. But you’ll be surprised to learn I have been,” he said in prepared remarks. “And here is what I’ve heard from you and from the people of Louisiana: ‘Yes, we do want to get rid of the income tax, but governor, you’re moving too fast and we aren’t sure that your plan is the best way to do it.’”

Notice of course he doesn’t admit he was wrong, people like him never do.  And he says there are other ways to get rid of the income tax. 

Already, several of you have filed plans that phase out the income tax. So, let’s work together to pass a bill this session to get rid of our state income tax.”

and since raising the sales tax doesn’t work, then this must mean cutting programs that aid low income families, the elderly, students, the disabled and other groups too lacking in political standing to fight back.  Exactly how that is an improvement over raising the taxes for those folks is not explained.

Paul Krugman, always on top of everything, documents the Jindal fiasco in even more detail.  Mr. Krugman tries to find the true heir to Margaret Thatcher in the U. S. and comes up with Mr. Jindal.

And what that means is that her truest heir in America is … Bobby Jindal, the not-so-whizzy whiz-kid governor of Louisiana, who proposed scrapping his state’s income tax and replacing it with sales taxes.
Grover Norquist loved it:

Grover Norquist, the intellectual leader of the anti-tax crowd in Washington, had praised Jindal’s plan as “the boldest, most pro-growth state tax reform in U.S. history.” He noted that it was particularly significant, because with Obama positioned to veto anything resembling the House GOP’s budget for the next several years, Louisiana might be Republicans’ best chance to show off their tax ideas on the state level.
“The national media and Acela-corridor crowd continue to focus on the bickering Washington, but they can learn what real tax reform looks like by looking to Louisiana,” Norquist said.

But strange to say, it’s not just Acela riders who hate this idea; so do the citizens of Louisiana, who disapprove by 63 to 27 percent. Jindal’s own approval has collapsed, so he’s having his own poll tax moment.

 Gee Grover, how is all this working out for you?

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