Louisiana Gov. Bobby Jindal isn’t particularly burning up the pre-campaign polls for 2016, in large measure because he’s a relatively little-known governor of a relatively small state with a poor tradition of successful political leadership, and most of what voters know about Jindal is his nationally televised fizzle of a speech responding to Barack Obama’s first congressional address.
Jindal has a nice story, of course — the young wunderkind policy wonk, born of Indian immigrants and educated at Brown, with a good track record as a reformist bureaucrat at an astonishingly young age, and two terms as the governor of Louisiana who ushered in greatly expanded school choice, privatization, and a reduction in the size of government. Jindal gives a better speech now than he did in 2009, often regaling audiences with his father’s poor-immigrant story including the fact that the governor was actually a “baby born on layaway.”
There’s a lot to like where Jindal is concerned, and he’s still quite young with a potential for a good political future.
But Jindal’s problem is his present; on Monday an independent poll found him underwater with Louisiana voters to the tune of just 27 percent approval (63 percent disapprove). And the problems he’s brought upon himself in 2015 make it impossible to mount a presidential run in 2016. He’s going to destroy that future if he doesn’t change course.
The primary danger confronting Jindal is Louisiana’s looming $1.6 billion budget deficit, a dragon that the state’s constitution requires be slain during the 90-day legislative session that begins April 13. The deficit comes partly from a slump in oil prices causing a steep drop in the state’s royalties and severance tax revenue, but Jindal has been patching budget holes for years by raiding the various dedicated funds to create a balanced budget out of whole cloth. Those funds having been largely drained, the $1.6 billion is a real deficit and the piper is demanding his payment.
Jindal’s administration released a budget proposal that actually leaves that budget $400 million short of balance Feb. 27, relying on a mishmash of cuts to the state payroll (primarily leaving unfilled positions vacant), staving off cuts to higher education with student fee increases, using nonrecurring revenue to plug some of the budget hole and other efforts at moving cash around to show a balanced budget. But the largest chunk of Jindal’s efforts to close the budget hole is a $526 million plan to eliminate “tax spending” in the budget; or, put another way, making a number of Louisiana’s business refundable tax credits non-refundable.
Some $377 million of the $526 million in “tax spending” Jindal seeks to eliminate is a refundable tax credit against Louisiana’s ad valorem tax on movable property, otherwise known as the inventory tax. On the surface, eliminating a tax credit that pays business $377 million per year above and beyond its state tax liability seems like a conservative effort at eliminating corporate welfare, and in fact Jindal has been praised by Americans for Tax Reform for seeking to make the tax credit nonrefundable.
But in reality, Jindal is proposing a tax increase. And in doing so, he’s about to demolish his relationship with the business community — perhaps the last bloc of political support he has left after seven years of inconsistent and at times indifferent governance.
The story of Louisiana’s convoluted system of inventory taxes and credits isn’t overly confusing. Rather, it’s a depressing study in the craven nature of what passes for bold reform, and Jindal is now at its center.
We’ll start with the fact that Louisiana’s homestead exemption is an unheard-of $75,000, which means local governments don’t really tax the middle class. Instead, they tax business. A lot. And the ad valorem tax on movable property constitutes a sizable chunk of their winnings — $377 million, in fact. This system of soaking business while giving the soft touch to the “common man” has been entrenched in Louisiana since Huey Long prowled the state capitol building, and nobody has ever made a real effort at doing away with it even though Republicans have come to dominate state politics.
Instead, a “reformist” legislature instituted a refundable tax credit in 1991 which, rather than eliminate the inventory tax, just reimbursed businesses in Louisiana for what the local governments were charging them. That might have seemed like a reasonable workaround as opposed to actually simplifying a tax system that was exporting Louisiana’s private sector to Texas and Florida at an astonishing rate, but instead it created a runaway budgetary problem for the state. The locals just hammered car dealers, grocers, manufacturers, and others with confiscatory taxes, and there was little pushback — the state would just make them whole.
Jindal has been in office for seven years and change, and he’s never even addressed the problem. Now, his solution is to eliminate the credit and functionally increase taxes on business by $377 million when what he ought to be doing is to propose eliminating the tax itself and everything that goes with it.
Were Jindal to do that he’d save $462 million rather than $377 million, though the local assessors and sheriffs (the majority of the sheriffs in Louisiana are still Democrats) would scream and howl. But Jindal would at least avoid a war with the Louisiana Association of Business and Industry, whose president Stephen Waguespack used to be his chief of staff. Waguespack trumped Jindal’s budget proposal with a suggestion that the whole inventory tax be eliminated, and two bills pre-filed for the legislative session would do precisely that.
Jindal is now caught between the business community on the right and higher education on his left, and the entire legislature, tasked with passing something that resolves the gigantic deficit in an election year, is ready to see him burn.
The governor’s defenders, of which there are no longer many, tout the fact he refuses to raise taxes to balance the state’s budget. For that he is to be praised, though he is proposing a $100 million increase in cigarette taxes to fund a reimbursement to college students for the increase in fees he’s going to charge as well as the aforementioned inventory tax increase. But merely refusing to raise taxes isn’t enough. In better times upon taking office Jindal agreed to a sizable tax cut, but he has not fundamentally addressed the state’s outdated government structure (Louisiana has 14 four-year public colleges, for example; Florida, with more than four times the population, has but 12) or made the case for major conservative tax reform.
What he has done, with a controlling Republican majority in the state legislature, is attempt to prepare the ground for a presidential run. And by spreading himself so thin he’s put his entire political future, as well as the state’s newfound Republican dominance, in jeopardy.