State surplus shows stability
Published 4:28 pm Thursday, September 19, 2019
News that Louisiana state government will have a $500 million budget surplus for the most recent fiscal year brought immediate calls for a tax cut from some Republican legislators. GOP gubernatorial candidates have been calling for tax cuts since they announced for office.
Economists believe surpluses are a sign that governments are in good financial health. Surpluses make it possible for governments to survive bad economic times and clear up some of their debts.
Moody’s Investors Service gave Louisiana a positive credit rating this week because of its improved financial outlook and its work to stabilize the state budget. The agency said Louisiana’s outlook change “reflects the significant improvement in the state’s financial position…”
Recent budget surpluses helped the state replenish its rainy day fund, pay down pension debt, contribute to efforts to curb coastal erosion and maintain buildings, highways and bridges that have been neglected for too long.
Teachers and K-12 education got new funds for the first time in a decade, childhood education got it first substantial financial help and colleges and universities saw their first real and significant budget increases in years.
That is progress, but the state still has a long way to go to solve its transportation issues. Road and bridge construction and maintenance has a $14 billion backlog, and another $15 billion is needed for mega-projects like new Interstate 10 bridges at Lake Charles and Baton Rouge.
How in the world can anyone call for a tax cut with those kinds of critical needs? Any hope for getting new taxes anytime soon to take care of those needs are slim to none, so surpluses are a major advantage.
Moody’s confirmed that fact when it said Louisiana’s savings accounts and reserve funds still fall short of the financial cushion the state needs.
David Lindenfeld, a retired professor from Baton Rouge, talked about the state’s tax situation in a recent letter to The Advocate. He listed state tax rankings from WalletHub, a personal finance website. Louisiana ranks 39th out of 50 on the state income tax, 44th out of 50 on the property tax, but 4th out of 50 on state and local sales taxes.
Sales taxes do hurt taxpayers with the lowest 20 percent of incomes, but the state doesn’t’ deserve the blame for that. The state sales tax is 4.45 percent, but local sales taxes that were approved by voters are as high as 7 percent in some places.
Tax Foundation reports California has the highest state-level sales tax rate at 7.25 percent. Indiana, Mississippi, Rhode Island and Tennessee are all in second place at 7 percent. Colorado, at 2.9 percent, has the lowest state level sales tax. Alabama, Georgia, Hawaii, New York and Wyoming are all at 4 percent.
Louisiana’s state sales tax is only 0.45 percent higher than those five states and it ranks 38th in the country. You don’t hear those who want to cut taxes say anything about the state’s 38th position.
Local sales taxes are collected in 38 states, and Tax Foundation notes they can rival or even exceed state rates. That is definitely the case in Louisiana where the average combined state and local sales tax is 9.45 percent, second highest in the nation.
The numbers make it clear that local voters who approved local sales taxes are responsible for the state being in second place. It was their choice, so why are those who constantly call for tax cuts blaming the state for high sales taxes?
Lindenfeld, the retired professor in Baton Rouge, said, “Voters may want to keep these figures in mind when evaluating the claims of the candidates regarding taxes.”
High sales taxes aren’t responsible for recent Louisiana budget surpluses. Personal income and corporate taxes came in higher than originally expected and federal tax changes increased state income taxes.
Federal income taxes can be deducted on state income tax returns, and federal taxes are lower because of the federal tax cut. Both Democratic Gov. John Bel Edwards and U.S. Rep. Ralph Abraham, Edwards’ chief Republican opponent, have said they want to eliminate the ability of state taxpayers to deduct their federal income taxes on state income tax returns because that is why state income taxes increased this year.
Edwards said, “We could then lower the income tax rate on 90 percent of Louisiana taxpayers.”
Abraham, like some of his GOP colleagues at the state level, said, “Our exorbitantly high, regressive sales tax must also be lowered…”
Only 12 other states have a lower state sales tax than Louisiana. The state sales tax is only 4.45 percent, and Abraham can’t lower those local sales taxes approved by local voters, some that are as high as 7 percent.
Calling state sales taxes exorbitant is one of a number of bogus issues being used by GOP gubernatorial candidates and their state party officials to try and discredit Edwards. The reality is that Louisiana state government is in better financial shape today than it has been in over a decade.
BUDGET STABILITY — The fact Louisiana has a $500 million surplus for the just-ended fiscal years is proof the state budget has been stable for over a decade, and is no cause to start cutting taxes.