After the 2012 elections, Louisiana Gov. Bobby Jindal (R) tried to position himself as someone who could help lead his party in a smarter direction. He famously argued he wants Republicans to “stop being the stupid party” and move away from “dumbed-down conservatism.”
The rhetoric was appealing at a surface level, but the problem comes when we see how the governor’s intentions manifest themselves in public policy.
Gov. Bobby Jindal is proposing to eliminate Louisiana’s income and corporate taxes and pay for those cuts with increased sales taxes, the governor’s office confirmed Thursday. The governor’s office has not yet provided the details of the plan. […]
Jindal said the plan would be revenue-neutral and that the goal would be to keep sales taxes “as low and flat as possible.”
Jindal will reportedly meet with state legislators over the next few weeks to talk about his tax plan in more detail. It’ll be something to look forward to, I suppose.
But while we wait for specifics, let’s pause to note how spectacularly bad this idea really is. In effect, Jindal wants to stop taxing what people (and corporations) earn, and instead tax what they spend.
That, of course, would mean pushing Louisiana’s income and corporate tax rates to zero, and increasing Louisiana’s sales taxes to, well, we don’t quite know yet. But since the entire effort would be “revenue neutral,” it means sales taxes would have to go up enough to cover every penny in lost revenue from the elimination of income taxes.
Take a wild guess who’d benefit – and who wouldn’t – under such a system.
Michael Kinsley wrote a piece several years ago that stuck in my memory.
It’s a zero-sum game: Every dollar someone’s taxes go down is a dollar someone else’s go up. What you spend every year is the amount you earn minus the amount you save. On average, Americans save practically nothing, but wealthier people save more. Very poor people actually spend more than they earn, while Bill Gates and Warren Buffett couldn’t spend more than a small fraction of their income if they tried.
Quite right. In this case, Jindal wants Louisianans to pay zero income taxes, which would necessarily mean a huge break for the very wealthy, while lower-income people in the state would suddenly see enormous sales taxes on everything they buy.
We’ll know soon enough whether this has a credible chance of becoming law in the state, but it’s a dreadful, hyper-regressive proposal.