LSUS Professor Jeff Sadow’s Stunningly Dishonest Defense of Governor Jindal’s Tax Giveaway

Throughout the last several years, as anyone who follows Louisiana politics can tell you, whenever Governor Bobby Jindal’s policies are challenged, you can count on blogger and LSUS Associate Professor Jeff Sadow to rise to Jindal’s defense. Sadow has published hundreds of thinly-sourced and poorly-researched screeds on his website Between the Lines, screeds that are often reposted on other conservative-leaning websites and blogs, screeds that attempt to intellectually justify Jindal’s policies by referencing the work of none other than LSUS Professor Jeff Sadow. Suffice it to say, I’ve never been impressed with Sadow’s blog or the integrity of his self-referential “scholarship” (if that is even the right word).

He’s a radical conservative who frequently rants against the basic function and role of the government, lambasting the poor and those who rely on public services and programs and denouncing the legacy of populism in Louisiana. Yet, ironically, this is a man who has spent the bulk of his professional career living off of the public dole, a man who owes much of his own success as a political commentator to the platform provided to him by taxpayers (his blog would carry little import without his title). I’ve read his work for years, and I’ve always been amazed by this basic lack of self-understanding. One could also say “hypocrisy,” but for Sadow, the word doesn’t seem to fit neatly: He’s not a hypocrite. He is, if anything, remarkably consistent. And even though I doubt I have agreed with a single thing Sadow has posted in years, I’ve never really considered him to be a “hack;” to me, he comes across as a true believer.

I’ll give you an example:

Yesterday, predictably, Sadow published a post on his website, which has subsequently been reposted on various other websites titled alternately; The Hayride led with the headline, “Sadow: Jindal’s Tax Plan Might Actually Grow the Economy If He (presumably Jindal) Does It Right.” On Sadow’s own website, he titled the piece, “Jindal tax swap succeeds in fairness, wealth creation.” These seemingly small distinctions are noteworthy only because the former implies even the slightest recognition of contingencies: “might…grow if he does it right;” whereas the latter headline, the one Sadow used for his own site suggests that Jindal’s success is a foregone conclusion.

For those of you who may not be caught up to speed, last week, Governor Bobby Jindal announced his plans to eliminate state personal income taxes and corporate taxes (and as we’ve subsequently learned severance taxes as well), replacing those sources of income (all while maintaining the state’s budget balance) by increasing state sales taxes by 3% all across the State. As I mentioned in a previous post, a 3% increase in Louisiana state sales taxes would make Louisiana’s sales tax rate the highest in the country, with an average rate of 11.86%.

Critics of Jindal’s plan, myself included, immediately pointed out that a massive (essentially a 75%) increase in state sales taxes is definitively regressive; if taxes for corporations and for the wealthiest in Louisiana are effectively eliminated, the State would then attempt to reclaim that lost income though massively expanding the taxes that we pay for every day necessities. The standard Republican response is: Higher sales tax rates discourage people from consumption and that, by extension, encourages investments. It’s silliness, of course.

As Mike Hasten reported in The Town Talk (bold mine):

In another look, the Institute on Taxation and Economic Policy says the proposal is bad news for middle and lower income taxpayers but good news for the top 20 percent of Louisiana’s taxpayers.

ITEP said it doesn’t figure into its calculations any tax relief for low income residents, even though Jindal says relief will be part of the plan to ease some of the impact of the swap on lower income workers. ITEP said that since there are no details on how that could be accomplished, it couldn’t work it into its calculation model.

The Microsimulation Tax Model shows the lowest 20 percent of Louisiana wage earners, with salaries of $18,000 or less, would pay $395 a year more in taxes under Jindal’s plan.

The second 20 percent, making between $18,000 and $34,000, would pay $566 more and the middle 20 percent, with salaries from $34,000 to $53,000, would pay $534 more in sales taxes.

The fourth 20 percent, earning $53,000 to $93,000, would pay $255 more.

You get this? If you make less than $18,000 a year, under Jindal’s plan, you’ll have to pay more around $395 more a year in taxes. Even if you make as much as $93,000, you’d still be paying around $255 more. Here’s where it gets interesting (bold mine):

But the formula predicts gains for taxpayers in the top 20 percent.

For those earning $93,000 to $182,000, the next 15 percent, there’s a $930 a year reduction in taxes and, for the next 4 percent, earning between $182,000 and $452,000, there’s a savings of $4,052.

The top 1 percent of taxpayers, those with incomes of more than $452,000 (average $1.12 million), is projected to save $25,423 a year in taxes.

Let’s recap: Among the very poor in Louisiana, Jindal’s plan would increase their taxes by as much as 3%, but if you make between $93,000 to $452,000, you’re set to receive a tax break of between 1% and 2%. And if you’re in the top 1% of income producers in Louisiana, you would save an astonishing 5.6% in taxes.

Make no mistake: Under Jindal’s plan, the poor will pay more so that the rich can pay less, significantly less.

Republican apologists like to argue that by shifting the tax burden from “productivity” to “consumption,” they will somehow, magically, transform Louisiana into a state that can become more competitive in landing big manufacturing plants and larger-scale economic development initiatives. It’s utter hogwash. Some call it “trickle-down economics;” others, like former President George H. W. Bush once called it “voodoo economics.” But after experimenting with similar plans during the Presidency of George W. Bush, we should know what it really is: A disastrous economic philosophy that could only be cooked up by those who believe the government exists to make it easier for the wealthy to become wealthier, especially if it means imposing draconian, bank-breaking taxes on the poor. It’ll teach them to save more, to consume less.

Some, like Jindal and Sadow, argue disingenuously that this is about fairness: Poor people usually don’t even qualify to make enough money to pay state income taxes: Why should they enjoy the largesse of tax dollars accumulated by the wealthy? Of course, many of the working poor and lower middle class– those who don’t earn enough to pay state personal income taxes– are our teachers, firefighters, and policemen. They’re the people who run our non-profit charities, social services organizations, and our service industries. They’re actually the backbone of our small businesses and the driving forces behind our local economies.`

And of course, Jindal’s plan would never work if suddenly the poor and the lower middle class actually stopped spending less; for his plan to work, they must consume the same, except with higher taxes.

Which brings me back to Jeff Sadow’s most recent column. Sadow writes:

However, a tremendous amount of exceptions occur to collection of sales taxes. In fact, the 191 of these cost almost as much as the income tax exemptions. And, in one of the few specifics offered, Jindal’s otherwise general plan would keep the biggest exemptions of all intact, including exempting purchase of unprepared food, drugs, and utilities, which are more than half of all of them and lower total state sales tax take by $718 million or more than a quarter in the most recent year with available data.

Sadow implies that those who pay sales taxes are the beneficiaries of a huge number of exemptions and that exemptions for food, drugs, and utilities would likely still remain. In practical terms, this means absolutely nothing. It’s a red herring: The State does narrowly carve out sales tax exemptions for food, drugs, and utilities, and those exemptions do result in significantly less income. But the bulk of those sales tax exemptions don’t benefit individual consumers: They benefit businesses, farmers, manufacturers, and local governments.  Jindal, Sadow seems to be implying, will keep the largest and most-needed exemptions for individuals, but it’s incredibly doubtful that he will offset those exemptions by repealing other exemptions that benefit small businesses. Sadow continues:

As constituted currently, if you are a single individual who makes minimum wage, who spends the bulk of that on unprepared (nonalcoholic drinks included only) food, utilities, and (prescription) drugs, and own a home worth $75,000, in net terms you will pay no state income taxes and in fact many in this situation will get a cash grant because of the EITC. For these people, the Jindal plan means they continue to pay net nothing.

This is a patronizing lie: Sadow’s defense hinges on the notion that people who make the minimum wage should only spend money on unprepared food, utilities, and prescription drugs. So, if you don’t need to buy furniture or a computer or a television or a cell phone, your taxes will increase. But according to Sadow, that’s your fault, not Jindal’s:

Government largesse in this instance, and is almost entirely maintained in Jindal’s planned changes, should extend only to basic needs: if you want luxuries like televisions or bigger, newer ones; or cellphones or more minutes for them; or to eat out or eat out more often and more of it, and the like, there’s no reason the state shouldn’t increase your penalty for engaging in this kind of consumptive behavior instead of you using those resources to put yourself in a position for a higher-earning job – or in even getting a job in the first place – while you are being encouraged to do so further by eliminating the penalty you suffer by having income or more of it.

You got that? This is not about raising your taxes; it’s about penalizing (not taxing, mind you) poor people for spending money on “luxuries” like “televisions” and “cellphones” and going out to eat at restaurants, because the poor should be taught a lesson on “getting a job in the first place.”

Sadow almost seems giddy when describing why he thinks the rich should control the political discourse and why the poor should be marginalized. Yes, there is also a social utility in this Machiavellian scheme (bold mine):

In the larger scheme of things, these kinds of exceptions Jindal seems intent on proposing work against his larger theory that simplification brings growth. The most efficient system spreads the tax burden as much and as flatly as possible, which these exceptions subvert. Further, because they reinforce the perverse nature of transfer payments – those who contribute the least to the system gain the most from it – they do the opposite of strengthening the connection that these users feel to the larger, organic society: when people contribute more of their own resources for use in public policy making, they likely are to invest more time and energy into critically appraising the use of those and everybody else’s resources, discouraging through their lobbying of policy-makers the use of those resources to fulfill low priorities, to privilege special interests, and to subsidize inefficient, if not wasteful, individual behavior.

I suspect I’m not the only one offended by Sadow’s borderline bigotry, his classist, arrogant, and paternalistic diatribe against the values of the working poor and the lower and working middle class. But here’s what you need to know, from the Louisiana Department of Revenue’s most recent annual report:

Louisiana already gives away 88.1% of its potential corporate income revenue in exemptions, $1.45B last year. We gave $1.13B away in exemptions for personal income, and $432M in severance tax exemptions. And yes, we gave away $1.3B in sales tax exemptions. That number is likely to not change. We’ll still be giving away the same amount in sales tax exemptions, but Jindal’s plan calls for eliminating nearly $200M a year in corporate income, $2.6B a year in individual income, and $764M in severance tax income. And guess where that money will be made up? By increasing taxes (Sadow may now want to call them penalties) on everyone else.

Here’s the projected losses over the next two years, and hopefully, someone with more skills at Excel than I possess will plug in numbers Jindal is proposing and show the rest of the State what it really looks like.