Mischief afoot with SB51

The Revenue Estimating Conference last Tuesday announced that the state must slash expenses by another $210 million because of drops in anticipated revenue.

The Revenue Estimating Conference, comprised of LSU economist Jim Richardson, House Speaker Chuck Kleckley (R-Lake Charles), Commissioner of Administration Paul Rainwater and Senate President John Alario (R-Westwego), monitors state expenses and revenues on an ongoing basis.

Last week, the four heard a presentation from Greg Albrecht, chief economist for the Legislative Fiscal Office. The news was bleak and the four officials dropped the revenue forecast for the coming year by $304 million.

But it’s not as if no one could see this train wreck coming.

Much like the tribulations currently being visited upon the New Orleans Saints, the state’s fiscal woes are 100 percent self-inflicted.

As the Ol’ Perfesser, former New York Yankees manager Casey Stengel, would say if he were still with us: “You can look it up.”

While it may a surprise to members of the House and Senate, the information was readily available from the Louisiana Department of Revenue in a obscure publication entitled Tax Exemption Budget 2011-2012.

The real puzzle is why no one else has bothered to ferret out this data.

But before getting into that report, let’s take a quick look back to May of 2008, four months after Gov. Bobby Jindal took office.

The state at that time was flush with money, thanks to federal funds dumped into the state to help it recover from the devastation of hurricanes Katrina and Rita.

Never content to grapple with fiscal prudency, legislative leaders and Jindal conducted a series of backroom discussions – as usual, out of eyesight and earshot of the public. Jindal emerged, beaming, to announce the good news: the highly regarded Stelly Tax Plan was being scrapped.

The bill, Senate Bill 87 by Sen. B.L. “Buddy” Shaw (R-Shreveport), rolled state income tax rates back to 2002 levels in January of 2009.

Jindal trumpeted that the bill would save single filers as much as $500 a year and joint filers $1,000.

What the governor did not say – but Albrecht did – was that single filers would have to make as much as $90,000 per year to reap the $500 savings and joint filers would have to make more than $150,000 to save the maximum $1,000.

While obviously of benefit to the wealthy, the Stelly repeal left middle income Louisianians out completely.

Albrecht also said the total cost to the state treasury would be about $300 million per year, beginning in the 2009-10 budget cycle.

Perhaps at this point it’s worth reiterating the most recent loss of revenue as projected by the Revenue Estimating Conference: $304 million.

Now to the Revenue Department’s Tax Exemption Budget.

The document is a mind-numbing 409 pages but one does not have to examine every page to see what has happened in Louisiana over the past few years.

In fact, pages 6 and 17 pretty much tell the story.

Page 17 provides a year-by-year summary of revenue losses from various tax exemptions granted by the state. The exemptions include corporate and individual income taxes, sales taxes and severance taxes, among others.

The combined four-year total for all tax exemptions shows that the state has lost a little more than $18 billion since the fiscal year ended June 30, 2009, the year after Jindal took office.

Much has been made by the administration of the unfunded accrued liability (UAL) of the state’s four retirement plans.

That combined UAL? $18.3 billion.

The breakdown shows a four-year loss of $5.6 billion in corporate income tax exemptions and another $5.6 billion in sales tax exemptions. Individual income tax exemptions account for an additional $4.2 billion and severance tax exemptions were another $1.5 billion.

Page 6, however, was the most revealing in that it illustrates the disparity between the corporate income taxes paid and the sales and income taxes paid by individuals in Louisiana in Fiscal Year 2010-2011.

• Corporate income taxes – $198 million;

• Estimated corporate income tax exemptions – $1.46 billion;

• Total potential collections – $1.68 billion;

• Percentage of corporate income tax loss – 88.1 percent.

The state was not nearly so generous with individuals.

• Total sales tax collections – $2.67 billion;

• Estimated sales tax exemptions – $1.39 billion;

• Total potential sales tax collections – $4.06 billion;

• Percentage of sales tax loss – $34.3 percent.

Sales taxes, of course, are paid by everyone. Even the poorest of the poor pay the same sales tax rates as the most wealthy, making sales taxes one of the most unfair.

Individual income tax collections were no kinder.

• Total individual income tax collections – $2.39 billion;

• Total individual income tax exemptions – $1.13 billion;

• Total potential individual income tax collections – $3.52 billion;

• Percentage of individual income tax loss – $32.1 percent.

To recap, the state collects only 11.9 percent of the potential corporate income taxes while exempting the remainder.

With sales and individual income tax, however, collections were 65.7 percent and 67.9 percent, respectively.

With this administration, the solution such an uneven playing field is obvious: more corporate tax breaks.

Jindal is pushing a package of bills that will award new tax breaks to businesses that are considering relocating or expanding into Louisiana.

And of course, the House overwhelming approved all three bills even though the Legislative Fiscal Office estimated the state could lose millions of dollars in tax income.

But Rep. Joel Robideaux (R-Lafayette) said the cuts would generate more tax dollars for Louisiana than the breaks will cost the state in lost revenue.

One bill, approved by a vote of 86-9 will give a payroll tax cut of between 6 percent and 15 percent for creating high-paying jobs with health care benefits. The question that was never asked was, where are the lower-paying jobs?

A 25 percent rebate over five years on relocation costs for companies moving corporate headquarters to Louisiana was approved by a vote of 81-13.

Finally, a bill calling for a different way to calculate state corporate income and franchise taxes, thereby lessening tax payments for participants, passed unanimously, 100-0.

So, while Jindal’s Deputy Chief of Staff Kristy Nichols testifies in favor of gutting retirement benefits for state employees, saying, “We’re drowning in debt,” her boss keeps on keeping on with lucrative tax breaks for his corporate friends, many of them campaign donors.

The rest of you?

May 15 is the deadline for paying your “fair share” in state income taxes.