In 2002 Republicans and Democrats in Louisiana came together and hashed out a compromise – known as the “Stelly Plan” – to stabilize the state’s fiscal situation. It remains to be seen whether that will happen again in 2018. Legislators are faced with $1.38 billion in expiring temporary taxes, and despite a series of meetings and gatherings, leaders have yet come to consensus on a long-term fix. Jon Kamp and Cameron McWhirter with Fox Business talked with the namesake of the Stelly Plan:
The state instituted a measure in 2002 known as the “Stelly Plan,” named for former Republican State Rep. Vic Stelly, which eliminated sales taxes on goods and services like prescription drugs and residential utilities while raising income taxes on both middle- and higher-income filers. … Mr. Stelly, a retired 76-year-old, said lawmakers made shortsighted policy moves with excess revenue they knew wouldn’t last. “If your Uncle Joe dies and gives you $10,000, can you just put that in your budget?” Mr. Stelly said. “If Uncle Joe doesn’t die every year, you’re going to be in trouble.”
Like the Stelly Plan, a balanced solution to the state’s fiscal cliff likely would include both reductions in state spending and some revenue raising measures. But increasing taxes is a tough sell in the current political climate:
Adding back any taxes today is a tough sell for fiscal conservatives in the state, said Jan Moller, who directs the nonprofit Louisiana Budget Project, a group that advocates for low and moderate-income families. Nearly all revenue-raising moves in Louisiana require two-thirds support in the legislature. Mr. Edwards backed wide-ranging recommendations by the fiscal task force, which include eliminating or lowering a state deduction on federal income taxes paid. His office stressed that he wants to replace revenue from expiring sources but doesn’t want a net increase in taxes.
A Christmas gift for the donor class
In a rush to have a tax cut bill on the president’s desk before Christmas, Republicans in Congress have not held hearings or allowed substantial time for debate to ensure all members of Congress understand the implications of the legislation for their respective states or constituents. Despite the short timeline, many economists and tax experts have weighed in and expressed deep skepticism about Republicans real motivations for shoving through an unpopular tax plan before the end of the year. Peter S. Goodman and Patricia Cohen of the New York Times with the story:
Many view the legislation not as a product of genuine deliberation, but as a transfer of wealth to corporations and affluent individuals — both generous purveyors of campaign contributions. By 2027, people making $40,000 to $50,000 would pay a combined $5.3 billion more in taxes, while the group earning $1 million or more would get a $5.8 billion cut, according to the Joint Committee on Taxation and the Congressional Budget Office. “When you put all these pieces together, what you’re left with is we are squandering a giant sum of money,” said Edward D. Kleinbard, a former chief of staff at the Congressional Joint Committee on Taxation who teaches law at the University of Southern California. “It’s not aimed at growth. It is not aimed at the middle class. It is at every turn carefully engineered to deliver a kiss to the donor class.”
Senate tax cuts go too far
Proposals to cut the corporate income tax rate have gained bipartisan support in the past, but none have proposed corporate tax cuts as deep as those in the tax reform plan being considered on the Senate floor this week. Barack Obama’s plan, Mitt Romney’s plan, and even that of the Business Roundtable only went as low as 25 percent, while the proposed legislation has a corporate tax rate of only 20 percent. Matthew Yglesias at Vox reports on how this quickly moving bill is more of a flex of power than a reasonable deal for the country.
More broadly, stepping back from things, if Congress passed a corporate tax reform that slashed the statutory rate from 35 percent to 25 percent, that would be a big deal. Nobody would be saying, “Those clowns haven’t accomplished anything”; they’d be saying, “Those guys achieved once-in-a-generation tax reform,” which is exactly what they hope we’ll say if they pass their cut to 20 percent. Except at a 25 percent rate, you could get the job done without including toxically unpopular provisions, and since it wouldn’t be toxically unpopular, you’d probably get some Democratic votes too.
Louisiana workers deserve a raise
Seasonal celebrations that include feasts and gifts are underway, which can be a time of increased financial strain for low-income earners, especially those who earn the federal minimum wage of $7.25/hour. Thirty states have taken action to enact state minimum wages above the federal baseline, which hasn’t been raised since 2009, but Louisiana lawmakers have repeatedly refused to pass legislation that would improve the wages of Louisiana workers. Sue Lincoln of WRKF-FM spoke with LBP about the realities for Louisiana’s low-income working families.
Raising the minimum wage has been a consistent policy goal for Gov. John Bel Edwards. As he says, “Seven dollars and a quarter is not a meaningful wage.” And Jeanie Donovan with the Louisiana Budget Project says the federal $7.25 per-hour minimum is keeping Louisiana residents in poverty. “Working full time, 40 hours-a-week, they would have to make around $11.66 per-hour to bring a family of four above the poverty line. And we know that about one in three Louisiana workers falls below that wage,” says Donovan. But Budget Project Director Jan Moller adds that not enough state lawmakers get it: “Minimum wage is a hard lift at the legislature,” he says. “There are just some people up there who don’t see the need.”
Number of the Day
50 – The number of estates in Louisiana that are worth enough to benefit from the estate tax cut included in the Senate tax plan. (Source: Center on Budget and Policy Priorities)