May 13, 2007

Louisiana Editorial Boards Urge Caution on Tax Breaks

When it was enacted back in 2002, the Louisiana legislature's "Stelly tax plan" was (correctly) hailed as a major progressive victory. The Stelly plan cut sales taxes on groceries and utilities, and increased income taxes on upper-income families to pay for it. Now lawmakers are debating whether to repeal the Stelly income tax increases based on what may be ephemeral budget surpluses. And, as the Louisiana Tax Blog notes, state-based editorial boards aren't too hot on the idea.

The Baton Rouge Advocate, in a Friday editorial, argues that if tax cuts are affordable, lawmakers need to explain why the income tax is the right thing to cut:
If tax cuts are called for, why should they not be targeted on economic development issues? By that, we mean reducing or cutting the business taxes levied in Louisiana but not in competing Southern states, or that otherwise impede business development.
The Advocate also (correctly) questions "the political wisdom of railing against a tax policy change that left the vast majority of taxpayers better off."

And in a Sunday editorial, the Shreveport Times argues that repealing the Stelly reforms would simply be bad policy:
A massive overhaul of that favorite whipping boy, the Stelly Plan, is a step backward. It properly shifted the state away from a dependence on regressive sales taxes on food and utilities, "temporary" taxes that made Wall Street bond analysts nervous, and shifted the burden to a less regressive income tax.
This is absolutely right. The Stelly reforms made Louisiana's chronically-unfair tax system less bad than it used to be. Repealing either part of this fiscally-responsible tax swap would put Louisiana squarely back in the ranks of the most regressive tax systems in the nation. Here's hoping that our elected officials read the papers...


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