Subscribe

Bobby Jindal finds the promised land of conservative tax policy

Bobby promoting a plan to raise $526 million without a tax increase. His trick: Turn refundable business credits into non-refundable credits.

  • close
    Gov. Bobby Jindal speaks about his legislative proposals at a news conference in Baton Rouge, La.
    Melinda Deslatte/AP/File
    View Caption
  • About video ads
    View Caption
of

Politicians looking to “enhance revenue” without raising taxes might want to take a close look at Louisiana, where Governor Bobby Jindal may have found the promised land of conservative tax policy. He’s promoting a plan to raise $526 million without a tax increase. His trick: Turn refundable business credits into non-refundable credits.

With a refundable credit, firms benefit from the subsidy even if their tax liability is zero. By making these credits non-refundable, as Jindal has proposed, their taxes technically don’t increase. They are still zero. But firms would no longer get that refund, saving the state millions of dollars.

Jindal’s move highlights the reality of these credits: They should be thought of as spending programs. Still, because a tax credit reduces the amount of revenue a state collects, a governor can raise money by making the credit less generous, without changing tax rates. Federal and state lawmakers are looking at this form of base broadening as a way address deficits without violating their no-new-taxes pledges.

Recommended: Taxes in 2015: 7 changes and 9 weird deductions

But none are quite as bold as Jindal, a GOP presidential hopeful. One of his biggest targets is the inventory tax credit. Louisiana is one of 9 states where local governments can levy a property tax on inventory. All businesses are subject to the tax but firms with large inventories—such as manufacturers, energy producers, big box stores, and car dealerships-- pay the bulk of the tax.

The state currently provides a refundable credit equal to the tax paid to the local parish (county). It is a messy way to provide state aid to the parishes. Instead of sharing revenue, the state requires businesses to pay the parish and then apply for a state refund. Under Jindal’s plan, the refund would be capped at the business’ state tax liability.

Even though Louisiana publishes a comprehensive tax expenditure budget, tax credits have not gotten the same scrutiny as appropriations. But they are spending and do put a strain on the state’s ability to provide adequate services.

By framing the debate as an effort to eliminate corporate welfare, Jindal may be able to get some of the additional revenue he needs to begin to address Louisiana’s huge fiscal deficit, without touching tax rates. Plus, he’s highlighting the nature of tax credits as spending programs. And that may encourage Louisiana lawmakers to take a hard look at other tax subsidies, like the $250 million film tax credit.

Which would be good for Louisiana since it can use the revenue more than the ideology.

The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on taxvox.taxpolicycenter.org.

About these ads
Sponsored Content by LockerDome
 
 
Make a Difference
Inspired? Here are some ways to make a difference on this issue.
FREE Newsletters
Get the Monitor stories you care about delivered to your inbox.
 

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK