Wednesday, July 17, 2024

Waguespack: A Bridge to Nowhere

by BIZ. Staff

Tax reform.

It’s a phrase frequently promised by politicians regardless of political ideology. No matter if you are a liberal, a conservative or identify as an independent voter, you probably want it also. In fact, who in their right mind would not want something called tax reform?

We all hate taxes, especially ones that seem arbitrary and are used to pay for the wrong things, and we assume reform of our broken tax code would lead to a better approach.

The catch is politicians all mean different things when they say “tax reform,” and it is often quite challenging for us all to know exactly what they intend to accomplish when they say it.

In D.C. last month, Congress passed their version of tax reform, and they were clear in their approach. They eliminated some exemptions and credits and used those savings to lower tax rates across the board.

The immediate result?

A surging stock market…companies of all sizes announcing plans to raise wages…give bonuses to workers…enhance 401k retirement plans…invest in new equipment…and even donate more to charity. Our economy and workforce are already benefiting because government finally allowed folks to keep more of their hard-earned money.

In the coming weeks, it will be Governor Edwards and the Legislature’s turn to decide how they will define “tax reform” here in Louisiana.

This summer, the $1.1 billion in temporary taxes proposed by the Governor and passed by the Legislature in 2016 will expire. This two-year bridge was intended to give elected officials the time needed to conduct a deep dive and learn how our government works and how it could be made more efficient and effective. It was never intended to be just a temporary tax bridge to permanent new taxes. The assumption was that this new long-term plan would be more comprehensive than just more taxes to fund the same old government model we have had for decades.

So, what’s the long-term plan they came up with after two years of planning?

Well, a few weeks ago, the Governor announced his plan, and it is unfortunately once again a tax-only solution to government shortfalls. Specifically, he proposes to use a combination of personal income tax increases and sales tax expansions to replace the current expiring taxes and fund government roughly as we have always known it.

While there are many questions that need to be answered by the administration as to who it is specifically targeting with these new tax shifts and how it compares to other states, the takeaway is fairly clear: This plan calls for many new taxes to replace some old taxes. No real spending cuts…no real government reforms.

There has to be a better way.

The Legislature clearly has its role during the session to closely examine all proposals, but the executive branch is constitutionally in charge of the agencies that spend all this money and should be able to recommend some ways to get more taxpayer bang for the buck. In the last two years, were there really no new ideas formed to demand more efficiency and effectiveness from our agencies and bureaucracies? No ideas that focus more on shrinking government rather than shrinking take-home pay for working families and small businesses?

Congress clearly defined tax reform with a new approach, and it didn’t take two years and a myriad of task forces to do it…they drove a solution that finally put the needs of the people ahead of the wants of government…and one that is clearly showing some early positive results for job creation, wage escalation and private sector investment.

We can do something similar to Congress here in Louisiana. It’s not too late. Just because taxing and blaming the private sector for the problems of government has always been a “go-to” move for Louisiana politicians doesn’t mean it has to stay that way. It’s time to throw away that playbook forever.

The two-year bridge set a clear expectation that this plan would be more than just tax shifts. The expectation was that any tax proposal at this point would be a component of a broad, comprehensive plan to redesign government and make it more responsive to taxpayers.

This session, any final plan must include more than just tax shifts.  It must include significant transparency of all spending at all levels of government, a rock-solid mechanism to control future government spending growth and the repeal of a host of statutory funds that wall off dollars from higher education and health care. It must kick off the process to modernize expensive legacy programs such as Medicaid and the state’s pension plans and make them affordable and viable for future generations. The model of government created by Huey Long – which relies on patronage, excessive political power and the heavy hand of state government far too much – must be holistically transitioned to a system that embraces the principle of local control and taxation closest to the people.

No doubt, these reforms are hard to implement, but we have to start this process at some point. That is why a two-year bridge was given to prepare for this moment. The time was given to prepare…and the time is now to implement.

Stephen Waguespack is president of the Louisiana Association of Business and Industry (LABI)

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