James Gill: How the Stelly plan’s demise has doomed Bobby Jindal, too
Picking out just one dumb move to blame for the stillbirth of Gov. Bobby Jindal’s presidential campaign may seem quite a stretch, but the numbers match uncannily.
Jindal’s hopes always seemed the product of a disordered imagination, but even he must see that the dream is over now that the rest of the country is waking up to the havoc he has wreaked. He is suddenly getting lots of coverage in national media, emerging as a flim-flam man who cannot be given a chance to do for the country what he has done for Louisiana.
The budget crisis that has exposed his shortcomings might not have happened but for the Stelly Plan, an attempt to meet the obvious need for a reform of the state tax system. Voters were playing with fire when they approved it in 2002, however, for it was a prudent, progressive, socially just and revenue-neutral measure. Governors and legislators weren’t about to put up with that. By the time they had finished meddling, severe and recurring budget shortfalls were inevitable because provisions that increased revenue were scratched and those that reduced it left in place.
This all went down in the years after Katrina, when the relief billions were pouring into the state and oil wasn’t much cheaper than wine. A sense of financial probity always deserts politicians in flush times, and the state was soon much worse off than it would have been had nobody ever heard of Stelly, which raised income tax rates and abolished the credit on state returns that wealthy filers had been allowed to claim for itemized federal deductions. Those hikes were offset by sales tax reductions.
Stelly was not only enlightened, in that sales taxes place a disproportionate burden on the poor, but it was sound fiscal policy. Economists say sales tax revenues tend to fluctuate whereas income taxes always will reflect economic growth. Because the private sector is booming, as Jindal never tires of assuring us that it is, the state coffers would have been overflowing by now had Stelly been left in place.
By the time Jindal took office, Gov. Kathleen Blanco and the Legislature already had begun carving up Stelly by reinstating the break for itemized deductions. Jindal followed up by signing off on the coup de grace in 2008, when income tax rates were returned to pre-Stelly levels. Each of the two hits to the state treasury came to about $300 million a year. Given that the state is now in the hole for about $1.6 billion, Jindal might therefore be regarded as the author of his own woes.
He could see it all coming, too, for he initially warned that hard times might be ahead and it would be folly to finish Stelly off. But because sales taxes are paid in dribs and drabs, and the income tax bill comes once a year, Stelly’s downside was the more visible, and voters, especially the well-heeled, commenced to squawk.
Jindal soon decided, as would any politician worthy of the name, that he’d rather be popular than right. So income taxes went down, sales taxes remained down and Jindal took a bow as though it was all a splendid idea and had been his all along. He thus mastered the art of the cynical flip-flop early on, which proved handy when Common Core came along.
Still, it would be grossly unfair to give him more than a share of the blame for the Stelly debacle, without which it is highly unlikely that public health care would be in disarray while college presidents ponder which campuses they may be forced to close down.
But, though the dumb move was by no means Jindal’s alone, there has been plenty of time to adjust to the straitened circumstances that quickly resulted, even without the tax hikes that a less doctrinaire governor might consider preferable to the destruction of our most important public institutions. Instead, taxpayers have been obliged to watch while business subsidies and tax credits multiply and superfluous contractors drain the treasury dry.
But if Jindal had what was lost on his Stelly venture, he might have been able to sustain his presidential fantasy at least for a little while longer.
James Gill’s email address is [email protected]