Louisiana Gov. Bobby Jindal’s efforts to conceal a series of tax increases might not only undermine his presidential ambitions; the bizarre scheme he forced upon the state’s legislature to do it could eventually compromise the renowned anti-tax increase pledge created by Grover Norquist of Americans for Tax Reform (ATR).
In the legislative session that ended late last week, Louisiana lawmakers passed $750 million in tax hikes to address a $1.6 billion revenue shortfall that threatened to close the state’s universities and cripple its publicly funded hospitals.
Those tax increases have angered some business leaders, whose companies will pay most of those higher taxes. In most cases, Jindal and legislators trimmed what the governor called “corporate welfare,” eliminating or suspending hundreds of millions in business tax breaks and refundable tax credits that some policy experts believe had compromised the state’s fiscal health while spurring meager economic growth. The business community’s opinion to the contrary, Norquist and ATR staff members advised Jindal that cuts to refundable credits were not tax increases.
That’s when Jindal and his staff proposed a convoluted, confusing student fee/tax credit “offset,” devised only so Jindal could claim his actions were “revenue neutral” and, therefore, did not increase taxes. With Norquist’s approval, Jindal pushed the so-called Student Assessment for a Valuable Education (SAVE) Credit Program.
Here is how the The Advocate of Baton Rouge explained this peculiar scheme:
It would assess a fee of about $1,500 per higher education student and raise about $350 million total, but only on paper. Students wouldn’t have to pay anything because [of] an offsetting tax credit for the $1,500. Nor would universities receive any new money.
However, the SAVE fund would create a tax credit for the $350 million that Jindal could use to offset $350 million of the new revenue that legislators are proposing to raise.
In other words, some of the revenue generated by the tax hikes will be deposited into a special state fund for higher education. Students enrolled in Louisiana universities will be assessed a phantom fee and awarded a corresponding phantom SAVE tax credit. Their schools will use those credits to draw down the funds in the higher education fund.
Voilà! A net tax increase is suddenly “revenue neutral” by virtue of the phony fees and credits.
Jindal’s SAVE bill is a scam – and everyone in the state capitol knows it. ”SAVE is a misuse of the tax system,” the non-partisan Public Affairs Research Council of Louisiana said in a report on the state’s budget. “It is being used merely to masquerade and promote tax increases.” The New Orleans Times-Picayune dubbed it a “silly charade.” The Advocate called it “a completely dishonest fee/credit scheme.”
Lawmakers might have simply raised additional revenue and given the money it to the state’s universities – which is, essentially, what they will be doing, but only after piping it through Jindal’s wacky, Rube Goldberg device that exists only to provide the patina of revenue neutrality.