Tax Analysts Blog

Paying for Past Sins

Posted on Feb 3, 2016

If Louisiana Gov. John Bel Edwards (D) has his way, his fellow citizens will be paying mightily for past budget indiscretions. The state faces a massive deficit that might reach close to $2 billion next year. And the state is short a bunch of money this year -- some say $700 million. Those are big numbers for a state with a budget of $25 billion. The problems stem largely from the previous administration pushing big tax cuts without the corresponding big public service cuts to pay for them. It's easy to blame former Gov. Bobby Jindal, but the Legislature had a hand in the budget as well.

Edwards has a fix, and not surprisingly, his fix is to raise taxes. But before he gets to the tax raising, Edwards wants to raid the rainy day fund (because it's raining), cut spending, and use the oil spill settlement money to pay bills. Those are all fine ideas.

Then the taxing starts. Edwards wants to raise the sales tax from 4 percent to 5 percent. The problem with that is the localities impose high sales taxes as well. Without providing details, the governor also said he wants to increase cigarette taxes (what politician doesn't?), telecommunications taxes, and taxes on business utilities. Finally, Edwards wants to reduce unspecified tax breaks. It seems the Democratic governor is going with regressive taxes on sales and cigarettes, as well as unsound tax increases on telecommunications. In most states, business utility taxes are simply a money grab.

There are three ways to balance a budget: Raise taxes, cut services, or impose a mix of taxes and service cuts. Edwards's budget plan is heavy on tax increases. The shame is that this mess was preventable. The Jindal administration pushed tax cuts without paying for them. It then tried to address the ensuing budget problems with a barrage of gimmicks. For that, the citizens of Louisiana are likely to pay a price.

 

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