Bobby Jindal Proposes Largest Tax Increase in Louisiana History, Highest Combined Sales Tax Rate in the US

Less than a year ago, Governor Bobby Jindal vetoed a bill to permanently extend a existing 4-cent tax on a pack of cigarettes. At the time, Jindal explained (emphasis mine), “I have made a commitment to the taxpayers of Louisiana to oppose all attempts to raise taxes.” It was a blatantly disingenuous argument: The bill wasn’t about “raising” taxes any more than they already were; it was a mere formality: Renewing a tax on cigarettes that had already been on the books, and Jindal’s opposition had nothing to do with the merits of the policy itself and everything to do with ensuring his unblemished resume tax on increases. And the timing couldn’t been worse. Jindal, after all, was still angling for a spot on Romney’s Presidential ticket.

At the time, James Gill of The Times-Picayune noted (bold mine):

But smoking is not the issue here. Jindal must figure that taking a few licks now will be worth it if there is a reward down the road, perhaps when he is running for another office. Indeed, when urging his fellow Republicans to uphold his veto of the cigarette tax, he said the issue is “personal” because he made a promise not to raise taxes.

The idea that it is against Jindal’s principles to break a promise no doubt raised a smile on some of the faces present. But this promise is different, because Jindal is mad about ideological purity.

Jindal was so dead-set on not raising ANY taxes, even a perfunctory renewal tax on cigarettes, that he wouldn’t even consider renewing a paltry 4 cent tax on cigarettes, a tax that had already been on the books. He was, after all, a man of principle.

A year later, Bobby Jindal apparently believes that he had hypnotized the entire State of Louisiana into some type of quasi-amnesiac ignorance (And if his college essay about participating in an unsanctioned demonic exorcism maintained even an ounce of credibility, it may seem at least remotely possible, particularly among his most devout believers).

But if you carried any illusion about Governor Jindal’s consistent ideological position, you’re now having to confront an inconvenient truth:

Two days ago, Jindal announced plans to impose the single-largest combined sales tax rate in the country: Under Jindal’s plan, for every ten dollars you spend in anything and everything, you’ll need to spend an additional dollar with the government, Again, a year go, Jindal even refused to renew a tax on cigarettes; now he wants to collect $1.41 more for every pack sold.

Any why? Because Jindal wants some way– any way– to shuffle in big, out-of-state corporations and pillagers- no state income taxes, no corporation taxes, no taxes on risky speculation. Come first; we’ll sort out the details later. The break almost exclusively benefits the wealthy.

But don’t just take my word. From The New York Times: (I don’t do this often, but read the whole thing:)

These regional disparities go back to Reconstruction, when Southern Republicans increased property taxes on defeated white landowners and former slaveholders to pay for the first public services — education, hospitals, roads — ever provided to black citizens. After Reconstruction ended in 1877, conservative Democrats — popularly labeled “the Redeemers” — rolled taxes back to their prewar levels and inserted supermajority clauses into state constitutions to ensure it could never happen again. Property taxes were frozen; income taxes were held down; corporate taxes were almost nonexistent.

Practically the only tax that could rise was the one that hurt the poor the most: the sales tax. And rise it did, throughout the Deep South in the late 19th century, then spreading into the Carolinas, Georgia, Florida and the rest of the region in the 1960s and 1970s. Even liberal politicians weren’t able to buck the tide — just ask Bill Clinton, who as governor of Arkansas urgently sought new revenue to improve his state’s ailing schools and found the sales tax was the only politically viable option.

If this were just a history lesson, we could set it aside. It isn’t. In the last 30 years, these trends have only gotten worse. Southern states have steadily increased the tax burden on their poorest citizens by shifting the support of the public sector to sales taxes and fees for public services. After California voters passed Proposition 13, which capped property-tax increases, in 1978, Western states began to move in a similar direction. Sales taxes on clothing and school supplies and fees for bus fare and car registration take up, of course, a far bigger slice of a poor household’s budget than they do from the rich.

Over the same 30-year period, some Northeastern and Midwestern states moved in the opposite direction. They mimicked the federal government by passing their own earned-income tax credits (and making them refundable, as the federal government has done, so that very low-income earners get a check after filing their returns), preserved progressive state income-tax rates, and either exempted food and other basics from sales taxes or gave sales-tax rebates to low-income households. No Southern state provides refunds to its poor citizens through the tax code, no matter how little they earn.

There are many reasons to worry about the growing regional divide. But even leaving aside basic fairness — why should a poor child in the Northeast have greater life chances than one in the South? — the divergence exacerbates poverty itself, driving households deeper into distress and lowering social mobility.

For a book published in 2011, my colleague Rourke L. O’Brien and I analyzed the combined burden of sales tax, state and local income taxes on poor households in 49 states, based on consumer expenditures, from 1982 to 2008. (We omitted Alaska because it offers oil-revenue-related rebates to every household). We looked at the relationship between the total tax burden on a poor family of three and state-level figures for mortality, morbidity, teenage childbearing, dropping out of high school, property crime and violent crime.

The fact is, the more the poor are taxed, the worse off they are, whether they are working or not.

And they continue:

It turns out that after factoring out all other explanations — like racial composition, poverty rates, the amount spent on education or health care, the size of the state’s economy, existing inequality levels, and differences in the cost of living — the relationship between taxing the poor and negative outcomes like premature death persisted. For every $100 increase on taxes at the poverty line, we saw an additional 7 deaths and 78 property crimes per 100,000 people, and a quarter of a percentage point decrease in high school completion.

Southern states have far higher rates of strokes, heart disease and infant mortality than the rest of the country. Students drop out of high school in larger numbers. These outcomes are not just a consequence of a love of fried food or higher poverty levels. Holding all those conditions constant, the poor of the South — and increasingly the West — do worse because their states tax them more heavily. They have less money to buy medication, so their health problems get worse. High sales taxes make meals more expensive, so they shift to cheaper, unhealthy food. If people can’t make ends meet, they may turn to the underground economy or to crime.

This self-defeating pattern has plagued the citizens of the “meaner states,” the ones that tax poor people at a higher rate, for a long time. But it is about to get worse. Governors in fiscally strapped states are hoping to roll back state earned-income tax credits. Some — like Bobby Jindal of Louisiana, Dave Heineman of Nebraska and Mary Fallin of Oklahoma — are aiming to cut or even eliminate state income and corporate taxes and raise sales taxes. North Carolina lawmakers are considering the same thing.

Proponents say these moves will make their states more economically competitive, bring back jobs, and attract high-income residents. But economists who have studied the impact of raising taxes on residential choices have found that tax rates don’t make much of a difference. Employers represent a different story: they are attracted to low-tax states, particularly if they don’t need high-skilled labor. Accordingly, low-wage job opportunities have grown in the Cotton Belt and the Sun Belt, and shrunk in the Rust Belt. There is something to be said for this, if the goal is to replace the nonworking poor with the working poor. But this is hardly a strategy for eradicating poverty itself.

The fact is, the more the poor are taxed, the worse off they are, whether they are working or not. We all pay a huge price for this shortsightedness. Medicaid payments, food stamps, disability benefits — all of these federal programs swoop in to try to patch up a frayed safety net. Consequently, the Southern states reap more dollars in federal benefits than they pay in taxes (like Mississippi, which saw a net gain of $240 billion between 1990 and 2009), while the wealthier states — which do more to take care of their own — lose out for every dollar they pay (like New Jersey, which handed over a net of $706 billion over that same period). As noble as the federal effort to rescue the poor in the “mean states” may be, it is not enough to reverse the impact of regressive taxation.

There is a better way: increasing taxes on luxury goods; exempting necessities like food, medicine and children’s clothing from sales taxes; and perhaps most important, issuing tax rebates and preserving refundable earned-income tax credits, which put more money in the hands of low-income households. Since poor families tend to spend all of what they take in, these protections would stimulate the economy and preserve, or even expand, the job base.

The states headed in the opposite direction are not only damaging the most vulnerable of their citizens, but exacting a significant toll on Americans in states with more progressive tax policies. We all pay for the damage done when states try to solve their fiscal problems, or score ideological points, on the backs of the poor.

Sound familiar? It should.

On a final note, I highly recommend Tyler Bridge’s commentary on The Lens. Louisiana is so lucky to have him back.