By Jan Moller
It didn’t get much attention, but last week Gov. Bobby Jindal made what appears to be a dramatic policy shift. Speaking to WWL-TV in New Orleans on the day that President Obama released a plan to cut corporate taxes, Jindal said:
The reality is, I’m certainly in favor of taking away all of the different subsidies and loopholes in the tax code, but let’s treat everybody fairly. Let’s do that across the board. I think just picking and choosing industries is not the way to go… and that’s what’s gotten us into the trouble in the first place.”
To which the Louisiana Budget Project says: Welcome to the party, governor! What took you so long?
As governor, there isn’t much Jindal can do to Obama’s plan to lower corporate tax rates while eliminating loopholes. If that was his goal, he could have stayed in Congress and joined the debate.
But there is quite a lot Jindal can do right here in Louisiana to fix a tax code that is riddled with loopholes and special-interest exemptions that are worth a combined $4.8 billion. As luck would have it, there is a document put out each year by Jindal’s own Department of Revenue called the Tax Exemption Budget. The latest version was released just this week.
We don’t know what motivated Jindal’s heartening turnabout on tax breaks, but it might have been this column by David Brooks, the conservative New York Times writer, who noted correctly that tax expenditures are just government spending by another name.
The U.S. does not have a significantly smaller welfare state than the European nations. We’re just better at hiding it. The Europeans provide welfare provisions through direct government payments. We do it through the back door via tax breaks.
For example, in Europe, governments offer health care directly. In the U.S., we give employers a gigantic tax exemption to do the same thing. European governments offer public childcare. In the U.S., we have child tax credits. In Europe, governments subsidize favored industries. We do the same thing by providing special tax deductions and exemptions for everybody from ethanol producers to Nascar track owners.
In Louisiana, this hidden state budget receives little scrutiny from the public or their elected representatives, though you can be sure the interest groups that benefit from these breaks are paying close attention.
And while the governor is now sending positive signals about the need to end loopholes and special-interest giveaways, the record shows the exact opposite has occurred on Jindal’s watch.
Perhaps the most illuminating section of the tax exemption report is the one devoted to corporate taxes. Here, we learn that in 2010-11, companies paid $198 million in state taxes and received exemptions worth $1.459 billion, for a “tax loss” percentage of 88.1 percent.
Compare this to the previous year, when companies paid $435 million in taxes and were exempted from $1.333 billion, for a loss percentage of 75.4 percent. The year before that, corporations paid $586 million, with a loss percentage of 67.8 percent.
The fact is, the percentage of corporate taxes that are actually paid, compared to the revenues lost to the state through exemptions and loopholes, has gone down each of the last four years. Not coincidentally, these years have also seen sharp cuts in what Louisiana invests in education, health care and other services that citizens depend on and help create a prosperous future for everyone.
So welcome, governor, to a long-overdue discussion on how we can make our tax code more fair and equitable for everyone by examining the mostly hidden maze of exemptions and loopholes that rob the treasury of much-needed revenue. We are thrilled to have you on our side, even if it took a while for you to get here.