Tuesday, May 12, 2009

Economist says bring back the Stelly Plan

As LFT President Steve Monaghan pointed out before the current legislative session began...

And as Lt. Governor Mitch Landrieu noted on May 5...

An economics professor and member of Louisiana's Revenue Estimating Conference has now confirmed: The legislature made a serious error last year when it reversed the so-called Stelly Plan tax reforms. And unless they undo that reversal, our state will continue its long, painful slide.

LSU economist Jim Richardson spoke to the Press Club of Baton Rouge yesterday, and as Advocate reporter Michelle Millhollon writes here, he said that last year's massive tax cuts were a mistake.

To briefly recap: the Stelly plan was an effort to make our tax code more progressive and less dependent on the price of oil (as it was in the 1980s, the last time an oil bust ruined our economy).

The Stelly plan reduced sales taxes on food, utilities and prescription drugs because those taxes were disproportionately high for poor people. It lowered income tax rates for the poorest citizens, and raised them slightly for the wealthiest.

But when some of those better-off citizens had to pay a bit more, they ran screaming to the legislature. And because the price of oil last year was over $150 per barrel, lawmakers felt free to ratchet back the Stelly Plan.

Now oil is hovering somewhere around $60 per barrel, and losing the Stelly Plan is costing the state $359 million.

That is why economist Jim Richardson, a member of the state's Revenue Estimating Conference, says that lawmakers should take another look at Stelly and perhaps reinstate its tax rates.

Which could very well be why Speaker of the House Jim Tucker, a Republican and great friend of tax cuts, says he does not believe the Revenue Estimating Conference needs to meet again before the end of the current legislative session.

It is customary for the conference to meet in May, but Tucker, according to this article by Times Picayune bureau chief Robert Travis Scott, does not want a meeting in which Richardson could express his views.

Tucker and Richardson are two of the three conference members; the third, Senate President Joel Chaisson, a Democrat, says he believes the conference should meet.

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