JINDAL’S NOTION TO END THE STATE INCOME TAX COULD BE A GOOD THING … IF

by Elliott Stonecipher

Jindal's Trial Balloon...
Jindal’s Trial Balloon…

As the news broke yesterday that Governor Bobby Jindal is floating a trial balloon about cutting out the state personal and corporate income taxes, my attention turned immediately to whether or not such a proposal might provide a cure for Louisiana’s three-decade-plus disease of population outmigration.

Generally, as I have often suggested, the seven states with no income tax – Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming – manage to “grow” their populations to varying successful degrees by marketing themselves as “no personal income tax” states.  Tennessee and New Hampshire benefit in a like manner, apparently, though these two states do levy personal income taxes on residents’ dividend and interest income.  (SEE Tax Foundation study report here.)  Notable in the context of Louisiana’s nation’s-worst population outmigration problem over the past three decades, our state is sandwiched between two states on the 7-state list, Florida and Texas.  Texas in particular has been identified over the years as a particularly powerful magnet which pulls former Louisianans away.

Louisiana Magnet?
Louisiana Magnet?

On its face, the Jindal proposal at this very early stage does little more that beg many more questions.  A key one of those is mentioned in a report today from Mike Hasten, writing for Louisiana’s Gannett newspapers.  In Hasten’s article, state representative Joel Robideaux quotes unnamed others as having identified 7% as the necessary state sales tax rate if only that levy is to replace the revenue generated by current income taxes.  Given that the state sales tax is now 4%, a jump to 7% seems far too high given that sales taxes are much too regressive for our significant population of low income residents.  In fact, Robideaux is quoted by Hasten as noting that point, and suggesting that “some combination of things (increases)” is more likely to be Jindal’s proposal.  (It is notable that Jindal has thus far refused to discuss his proposal publicly, including with the news media, a suggestion that the floating of this balloon may finally prove to be little else.)

In a state that currently has the nation’s 3rd-highest sales tax, raising it another 3% would put Louisiana’s state and average local sales tax rate at 11.85% according to the Tax Foundation’s numbers.  Louisiana would thus become the only state in the U. S. to have a double-digit sales tax rate.  That, common sense would dictate, certainly would not attract people to Louisiana who are now living elsewhere.

Bad EstimationI find it interesting, and likely important, that Jindal’s proposal is coming at a time when the state’s Revenue Estimating Conference continues to note declining personal and corporate income tax revenue.  At the same time those reports are attracting increasing attention – in this, the state’s 5th consecutive year of mid-year budget cuts, largely due to those very income tax revenue declines – Jindal and his team are thinking about turning away from those revenue sources altogether.  That would certainly be a way for the governor, as he runs for president, to partially cover-up the annual drip, drip, drip of continuing evidence that the state’s economy is anything but the better-than-elsewhere phenomenon he so loudly claims it is.

Between the 1980 Census and the Census Bureau’s annual population estimates of July 1, 2012, Louisiana has hemorrhaged some 608,000 of its population due to net outmigration.  Since about the time former Governor Dave Treen was inaugurated, our total population increase has been a paltry 9.4%, compared to 38.6% nationally.  Literally, the nation’s population has grown more than 4-times faster than Louisiana’s, and those most recent Census estimates, through just six months ago, show this stagnation to be firmly – still – in place.  Even more startling is our comparison in this context to other states in the South.

Cart before horse?
Cart before horse?

If we really want an expanding tax base built on a population of those who pay taxes, we must build it.  There is no magic wand, even for a governor who seems convinced he will be president.  A good start is a new tax structure, since the one we so carefully nurture and support is achieving exactly the opposite of what we say we want.  In fact, the present tax structure feeds the pernicious decline of Louisiana.  The new tax structure we need must have the long-term, not 2016, as its target date.  This would-be new tax structure can be designed from the start to incentivize those who live elsewhere to move and live here.  Absent such incentives, our population stagnation is most likely to turn to decline, with a growing percentage of residents who pay little, if any, of the taxes necessary to support even average government services.

A relatively few of us understand that only our toughest problems, requiring the most and hardest work, are left to be solved.  That work requires very heavy public policy and political lifting, and leadership from people who are deeply invested, with plans to be here for the long haul.  In the absence of that work, more and more of us will vote with our feet and head to places where the tax burden is much more fairly shared by expanding populations of residents.

Elliott Stonecipher

Elliott Stonecipher’s reports and commentaries are written strictly in the public interest.  No compensation of any kind has been solicited or accepted for this work.  This work is protected, and no other use of it is permitted without the written consent of Mr. Stonecipher.