What do the budget crisis in Louisiana and Ikea have in common? Taxes

Louisiana may need a tax hike, while Ikea is in trouble for tax evasion.

Gerald Herbert/AP/File
Louisiana Senate President John Alero, R-Westwego, applauds after the National Anthem during the opening of a special legislative session in the state House chamber in Baton Rouge, La. (Feb. 14, 2016).

There’s a “hot mess” of a budget crisis in Louisiana. The legislature began an emergency session over the weekend. Lawmakers need to close a $943 million budget shortfall by June 30, and Democratic Governor John Bel Edwards recommended tax increases totaling $836 million to help get there. In a  televised address late last week, he warned that without tax hikes, the state might have to cut medical  services, education, and even… college football. Once the legislature fills this year’s fiscal hole, it must turn to the projected  $2 billion shortfall for next fiscal year, which starts on July 1.

Did Ikea evade $1.1 billion in taxes? The European Union’s Green Party says the firm didexactly that between 2009 and 2014. The European Commission plans to review the Green Party’s claim that the furniture giant shifted profits from its European locations through a subsidiary in the Netherlands. Ikea says “We pay our taxes in full compliance with national and international tax rules and regulations.”

Speaking of international taxation… House Ways & Means Chair Kevin Brady told the  Tax Council Policy Institute that he’s encouraged by what Treasury Secretary Jack Lew told the panel about addressing corporate inversions. Tax Analysts reports (paywall) that Brady wants Ways & Means to draft both international tax reform legislation and a blueprint for comprehensive reform this year. Would they add to the debt, a non-starter for the White House? “Real-world budget scoring that recognizes the growth aspects of tax reform is the responsible path,” Brady said.

And on the campaign trail…Bernie Sanders doubles-down on his “speculation tax.” The Democratic hopeful touted his financial transaction tax of 0.5 percent for stocks and 0.1 percent for bonds to help pay for universal college education and health care. TPC’s Len Burman explained the likely mixed effects of such a levy. "On the one hand, it will raise the cost of investment… On the other hand, to the extent that it discourages unproductive trading… that’s a good thing for the economy.”

While some GOP hopefuls defended their tax cuts during Saturday night’s debate. Ted Cruz insisted  that his business flat tax is not a Value Added Tax—which conservatives don’t like—because his proposal is not a sales tax. But the tax is, in fact, a VAT. Marco Rubio had to explain why he wants to triple the child tax credit. He said that if business can deduct costs of equipment, parents should get a credit for the investment they make raising their children. As for Jeb Bush: He dismissed concerns about his plan to tax hedge fund managers’ income as ordinary income instead of at the lower capital gains rate: “It’s not the end of the world.”

The CRFB has a quick take on Donald Trump’s tax plan. The Committee for a Responsible Federal Budget has a rough take on the GOP presidential contender’s tax proposals. In a nutshell, he’d “add between $11.7 and $15.1 trillion to the debt over the next 10 years, including interest… [D]ebt would grow from 75 percent of Gross Domestic Product today to as high as 140 percent by 2026.” Even if his plans lead to significant economic growth, the debt would still rise to 115 percent of GDP. Much like TPC’s analysis of the Trump plan, CRFB concluded that Trump would need to find deep spending cuts to offset those tax reductions.

This article first appeared at Tax Vox.

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