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.

Landrieu: Maybe all those tax cuts weren't such a great idea

With the state teetering on the brink of fiscal disaster, Lt. Governor Mitch Landrieu delivered a much-needed dose of reality to members of the Press Club of Baton Rouge on Monday.

Landrieu told the press that if the state remains on its current track, this year's $1.3 billion deficit could grow to as much as $6 billion within three years. Because the state cannot adopt a deficit budget, we would have to endure cuts much more drastic than those under consideration now.

As Advocate reporter Sarah Chacko writes here, Landrieu said lawmakers should reconsider last year's elimination of the Stelly plan reforms. Those changes to the tax code slightly increased income taxes for upper income citizens. As a tradeoff, our dependence on the price of oil was finally abated.

Last year, state finances seemed rock-solid, so lawmakers repealed the Stelly plan. But with the national economy in recession and the price of oil less than half of what it was just a year ago, the move no longer seems very smart at all. The $359 million surrendered by lawmakers last year could certainly be used now.