Is Jindal’s tax swap just an elaborate payday loan scheme?

A shop window advertising payday loans.

A shop window advertising payday loans. (Photo credit: Wikipedia)

By Robert Mann

The news came late on the Thursday afternoon before Good Friday – Gov. Bobby Jindal would ask the Legislature for a whopping 56 percent increase in the state sales tax to offset his proposed elimination of income and corporate taxes.

The proposed bite on the poor and middle class was already pretty steep, as Jindal had first said he would ask lawmakers to increase the 4 percent state sales tax to 5.88 percent. Now, the proposal is a stunning 6.25 percent.

The reason? Despite attacking as “erroneous” a report by the Public Affairs Research Council that Jindal’s revenue estimates were off by about half a billion dollars, it turned out that Jindal’s Revenue Department had relied upon erroneous data of its own.

The plan, as originally proposed, would blow a hole in the state’s budget. Jindal and his aides had to find more revenue, meaning the poor and the middle class must pony up even more cash from their ample coffers.

The additional money that the poor are required to pay will be rebated to them at the end of each tax year, Jindal and Revenue Department executive counsel Tim Barfield assure us. (Sorry middle-income taxpayers, we can’t do without your money.)

In other words, in order to give a generous tax break to wealthy citizens and corporations, the poor will lend the government hundreds of millions in hard-earned money.

But don’t worry, 11 or 12 months hence, that tax money will be rebated to them in the form of a credit card, much like the one issued by the state’s Department of Social Services to welfare and food stamp recipients.

With no interest paid to them, of course.

So, the state will be asking the state’s working poor to operate as a collective payday loan operation. Only the poor aren’t allowed to charge the state 390 percent interest.

But it’s all good, Jindal assures us.

“These provisions ensure retirees, low-income residents and families at all income levels will be better off,” he said in a recent speech.

The lucky duckies!

In all, the Revenue Department says it will rebate about $165 million for the first year of Jindal’s proposed tax swap.

According to a report by the Associated Press,

Families would be eligible for rebates if they earn no more than $35,000 a year if married with children or $20,000 if single with children, under the Louisiana Family Assistance Rebate Program outlined to lawmakers.

The top annual rebate allowed would be $350 for a married couple earning no more than $15,000 and having five or more dependent children, revenue department spokesman Doug Baker said Friday.

Tim Barfield, Jindal’s leader on the tax revamp, estimated about 650,000 families would be eligible for the low-income program – more than the number of households that receive food stamps in the state.

So everything’s fine, right? Well, not exactly.

Besides the troubling reverse payday loan aspect of this tax scheme, there’s also questions – yet unanswered – about just how these rebates will be administered.

At this point, we can assume that low-income taxpayers will be required to claim the rebate, as do several states that rebate sales or other taxes paid by the poor. South Dakota, for example, requires low-income citizens to submit this form every three months to claim their sales tax rebate.

Should Louisiana taxpayers be required to file paperwork, even once a year, to claim their rebate, it’s almost certain that many won’t do so. They will either not know about the rebate or they will be unable – because they are so busy scraping out a living – to file the paperwork.

This scenario isn’t a product of my imagination. It’s exactly what occurs every year with the federal Earned Income Tax Credit (EITC), worth about $2,000 on average, per family, to the working poor, according to the Internal Revenue Service (IRS).

As described by the Denver Asset Building Coalition:

The EITC is a special tax benefit for working people who earn low or moderate incomes. It has several important purposes: to reduce the tax burden on these workers, to supplement wages, and to make work more attractive than welfare.

Workers who qualify for the EITC and file a federal tax return can get back some or all of the federal income tax that was taken out of their pay during the year. They may also get extra cash back from the IRS. Even workers whose earnings are too small to have paid taxes can get the EITC. What’s more, the EITC reduces any additional taxes workers may owe, such as payroll taxes.

But about 20 percent of taxpayers who qualify to have their Social Security taxes rebated simply don’t apply, the IRS says.

Why would someone not apply for a rebate of that size?

“There are two big reasons,” Mark Batchelor, manager of financial-stability initiatives for the Heart of Florida United Way, which is running an awareness campaign on the issue, told the Waterbury (Conn.) Republican-American. “The first is that people who are financially insecure are often too busy taking care of their lives to seek these things out. And second, the recession knocked a lot of people who wouldn’t normally qualify into that tax bracket.”

But to get the money, workers must complete and submit a form.

“Even if you’re making less than $10,000 and you don’t have a [tax] filing requirement, the only way you’re going to get any credit (or refund) is if you file a tax return,” Carolyn Spohrer, deputy director of Virginia Community Action Partnership, an anti-poverty group, told the Waterbury paper. “And to some people that’s scary.”

Could it be that Jindal and Barfield are actually counting on the fact that many working poor in Louisiana will never get around to filing for their sales tax rebate?

And even if they get that debit card, who’s to say they’ll spend it all. How many times have you left a balance on a rebate card from a retailer?

None of this would be necessary if Jindal cared enough about the plight of the poor to find another way to finance his tax scheme.

As a group of about 250 Louisiana clergy recently explained in their open letter to Jindal, high sales taxes are very regressive taxes that punish the poor and reward the wealthy.

“We are concerned,” they wrote, “that your plan proposes to use the increased revenue generated by a heavier burden on poor and moderate income families, not to fund any of the important needs and services our State faces, but to decrease the tax burden for those members of our community who are most blessed with wealth and resources.”

Jindal, of course, will counter that his rebate will make whole all those poor families who are forced to shoulder a 56 percent increase in their sales taxes.

What he won’t explain is why the poor should lend their money to the state for six or 12 months, while the wealthy will benefit immediately by virtue of generously lower weekly or monthly payroll tax deductions.

Perhaps, in response, some legislator should file a bill that would allow the state’s working poor to form a payday loan cooperative.

If they’re going to be lending the state their hard-earned cash, shouldn’t they be entitled to earn a little interest on the deal?

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15 Responses to Is Jindal’s tax swap just an elaborate payday loan scheme?

  1. Judith says:

    Payday loan cooperative–great idea! Jindal appears to have no conscience, and demonstrates as much at every opportunity. Good post.

    Like

  2. Fredster says:

    Are Jindal and crew absolutely sure they got the final number on the amount of the sales tax increase? I mean, we wanna make sure he’s got the right numbers before he really twists the screw into the poor and working class folks.

    Like

  3. JMW70710 says:

    I’m going to make out like a bandit. What do I care about those poor schlubbs too poor, too ignorant, too unaware to file paperwork, prove income (or lack thereof), in order to get a couple of hundred in rebate. The threshold is ridiculously high–married? Five kids? What planet do these people live on?

    Like

    • John T says:

      Jindal has obviously consulted with our NW Louisiana U.S. Representative John Fleming who owns a couple of payday loan operations. Both have figured out how to maximize their take from the poor and supplement the pockets of the wealthy be it themselves or others.

      Like

  4. Vicky says:

    He also consulted Chuck Kleckley who received a lot of campaign contributions from payday loan companies.

    Like

  5. tls0 says:

    What’s the real “reason” for killing the income tax?
    To get all the growth that a state that has it lacks?
    Should we shrink like Wyoming (-1.2% state GDP 2011) with no income tax,
    or grow like Oregon (+4.7% state GDP 2011), with no sales tax?

    BJ for everybody in 2016!
    (Health care providers can all come clean.)
    Donate your sales tax rebate in advance–
    a payday lender will give you the chance.

    Like

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  7. Margherita McWilliams says:

    And, what’s to stop Jindal, and his successors from terminating the rebate when they decide that it’s too costly to the state to continue it?

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  8. Pingback: Is Jindal’s tax swap just an elaborate payday loan scheme? | Kill the Jindal Tax Bill

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