Bret Baier: “You passed a plan that many looked at as a way to keep a presidential campaign promise by not raising taxes. … But when it’s budget specifics and you are doing one thing and talking about one thing, just so that you can say that you didn’t raise a tax, but it’s a fee, isn’t that stuff that Republicans hate?”
Bobby Jindal: “Bret, no, there’s actually a tax credit — there’s a tax cut for families whose kids are going to universities in Louisiana. That’s an actual tax credit. That’s a tax cut.”
— exchange during Fox News Sunday interview, July 12, 2015
Two of Gov. Bobby Jindal’s (R) most common talking points are his anti-tax mantra and his record on cutting Louisiana taxes. In a recent TV interview, Jindal was asked about the tax and fee increases approved in the most recent budget. Yet the presidential hopeful responded that he actually gave a tax credit, which amounted to a tax cut.
What is going on? Did Jindal really enact an overall tax cut?
Jindal needed to close a $1.6 billion budget gap for fiscal 2016 without violating the anti-tax pledge he made with Americans for Tax Reform (ATR).
In June, Jindal approved the $24.6 billion state budget, which included $746.8 million in a host of fees, tax credit adjustments and tax increases, as well as $400 million in one-time funding measures. The other $400 million came from restraints on state spending, such as canceling state employee raises.
Among the revenue-raising measures Jindal signed into law were a 50-cent-per-pack increase in cigarette tax totaling $106.4 million, a $130 million reduction in inventory tax credit, a $19 million acceleration to phase out the solar tax credit and more. (For a full list, see Page 7 of this report by the Public Affairs Research Council of Louisiana, a nonpartisan public policy research agency.)
But Jindal indicated to lawmakers that he would veto the state budget if it did not include the Student Assessment for Valuable Education (SAVE) program, which would set up a new tax credit for higher education. This was intended to “offset” tax increases in the state budget plan, so that Louisiana does not have a net tax increase.
State lawmakers wrote to ATR opposing the tax credit, which they called a “purely fictional, procedural, phantom, paper tax credit” set up to meet Jindal’s pledge and achieve revenue neutrality. The credit would set a dangerous precedent for future legislatures and governors to “raise taxes on a nearly unlimited basis, and then claim revenue neutrality” through such a tax credit, they wrote.
ATR, headed by Grover Norquist, responded to lawmakers that the organization does not oppose or support the SAVE program: “If you don’t like the SAVE Act, why not find other offsetting tax cuts that are more to your liking? ATR is agnostic as to whether a credit or deduction is good policy. … Removing tax credits or deductions while reducing the tax rate so that the total bill is revenue neutral is not a tax hike.”
Lawmakers included the SAVE program in their budget package to Jindal, in an effort to avoid a veto.
But the program largely is an accounting measure. It sets up a separate state obligation to pay $350 million for higher education, in “fees” assessed on families and students. (This money normally would have come out of the state general fund, according to the Public Affairs Research Council of Louisiana.) So families and students would have seen a tuition increase. It also gives $350 million in tax credits for the families. But families and students don’t see either the fee or the tax credit; the tax credit gets transferred directly to the Board of Regents, which oversees higher education. The Board of Regents then uses the credit to get pay off the obligation through the Department of Revenue.
Officials from Jindal’s administration said that if there were no tax credit to balance tax revenue increases over five years, the state would have levied the full assessment on student tuitions, because of the budget obligation.
Jindal’s campaign put us in touch with the state revenue secretary, who explained that there is a tax revenue neutrality after five years (fiscal years 2016 to 2020). Therefore, the budget meets Jindal’s pledge that there would not be a net tax increase. But the tax revenue breakdown provided by the department shows that the net tax revenue neutrality happens after five years largely is due to this “tax credit.”
Bottom line: The SAVE program sets up a new tax credit to “offset” the state’s tax and fee increases. The state “assessed” a “fee” on families. But families will not see any difference as a result. The “cut” that Jindal refers to is to the overall state tax revenue over five years, not to the families’ tax obligation every year.
Jindal campaign spokeswoman Shannon Dirmann said in a statement: “This is nothing more than a sour grapes argument from liberals who wanted the Governor to increase taxes. It’s a cut. Here is why: There were 12 bills proposed this session by legislators to raise tuition on students because Louisiana is one of two states where the Legislature controls tuition and fees. The Governor wanted to provide a tax credit to families to help them pay for those rising costs. The SAVE credit does that by reducing the burden on families and students, who would otherwise be paying more to send their kids to college. We think that’s a good thing.”
The Pinocchio Test
The state budget that Jindal approved in fiscal 2016 includes fee increases and reductions in tax exemptions and credits. It also includes at least $106.4 million in new tax revenue, in cigarette taxes. And, it creates a new tax credit that appears to offset these revenue increases over five years.
But in practice, this is an accounting measure set up to avoid a net tax revenue increase on paper. Jindal says the tax credit is actually a tax cut for families, but that’s not the case. Jindal claims families will see a tax cut thanks to his new budget. But in reality, families won’t notice anything as a result of this program added to the budget, as state officials confirmed.
This type of numbers magic only exists in the budget accounting world, and means nothing to ordinary taxpayers. We wavered between Three and Four Pinocchios. But the state did, indeed, create this new obligation and did establish this “tax credit,” for all intents and purposes. And it does contribute to an overall net tax revenue decrease after five years. Such accounting tricks are the reason why many people hate politics — but it does not quite rise to Four Pinocchios.
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