Opinion

The Great Debate

Jindal’s model for tax reform

With dueling budgets being introduced on Capitol Hill this week, the possibility of tax reform is the talk of Washington. As we predicted before last November’s elections, tax reform will be on the agenda in 2013 – but has its best chances in the states. We are seeing that demonstrated Thursday by Louisiana’s Republican governor, Bobby Jindal.

Jindal unveiled what could be, if approved by the legislature, the boldest, most pro-growth state tax reform in U.S. history. His plan, outlined in Baton Rouge this morning during a joint meeting of the House Ways and Means Committee and the Senate Revenue and Fiscal Affairs Committee, calls for the elimination of all state personal and corporate income taxes, as well as the state franchise tax on capital stock. This would be replaced by an increase in the state sales tax rate to 5.88 percent, up from 4 percent. The sales tax would also apply to a broader base of goods and a number of services previously untaxed.

Many governors around the country have proposed rate-reducing tax reform, but Jindal’s plan sets a gold standard for pro-growth reform. His proposal could mean more disposable income for families while increasing the job-creating capacity of employers across the Pelican State.

It would also make Louisiana’s tax code more conducive to economic growth. A recent Organization for Economic Cooperation and Development report ranked taxes according to their negative economic impact. The study concluded that taxes on income and capital, which Jindal’s plan would eliminate, were the most damaging.

Louisiana ranked 32nd on the nonpartisan Tax Foundation’s 2013 State Business Tax Climate Index. If Jindal’s plan is approved and signed into law, the state will jump to No. 4 on that index.

from Judgement Call:

The fiscal crisis nears – or not

Few economists preach spending cuts as a cure for high unemployment. Yet that’s exactly what Congress decided when it imposed, starting March 1, across-the-board spending cuts (the “sequester”). Despite Friday’s mildly upbeat jobs numbers, the economy remains limp, with 15 million or so unemployed individuals who want to work. Federal spending cuts won’t make their plight any better.

Congress has known for quite some time that the federal budget will turn sour in 10 to 15 years, with expected outlays far outstripping expected revenue. For complicated, if not odd, reasons, Congress now feels compelled to do what it ordinarily shuns: cut federal programs and raise taxes. That might seem politically brave and responsible. But brushed up against facts, the case for Congress taking swift action wobbles, hitting wrong targets at the wrong time.

Of the many reasons politicians offer for cutting federal spending during economically straitened times, two cry out for attention. First, many liberals and conservatives say, Congress needs to stanch soaring federal spending. Second, conservatives say, federal programs are growing ever more intrusive, ever more threatening to private initiative.

Obama’s political options

Fiscal crisis? What fiscal crisis? The stock market is up, unemployment is down and the deficit is shrinking.

The fiscal crisis is in Washington, and it’s a crisis of Washington’s own devising. All those deadlines! January 1: the fiscal cliff. March 1: sequesters. March 27: a possible government shutdown. Sometime in August:  the debt ceiling, again.

The unending fiscal crisis could take up the entire year. President Barack Obama desperately wants to end it. For one thing, more spending cuts could bring on a recession. For another, an unending fiscal crisis would monopolize the agenda. No time for Congress to take up immigration reform or gun control or the minimum wage or preschool education.

California v. Texas in fight for the future

It is not a national election year, but the “red state versus blue state” wars continue. Texas Governor Rick Perry’s recent foray into California, to lure away businesses and jobs, signals more than a rivalry between these two mega-states. The Texas-California competition represents the political, economic and cultural differences driving American politics today – and for the foreseeable future.

Texas and California are robust political and economic competitors. We don’t know which will be the template for the future. As California emerges from its economic and fiscal doldrums and some of Texas’ vulnerabilities become evident, it is now far from certain that Texas will emerge the victor.

California is a global hub for trade, tourism, culture and the manufacture of ideas and intellectual property. From high tech and biotech to entertainment, travel and logistics, the state’s brand transcends national boundaries. The Golden State tops the nation in agriculture. It also sets the pace on green energy development, which could lead to a dramatic increase in the state’s energy production.

A sequestration solution for the Pentagon

The sequestration drama in Washington is less severe and intractable than you have heard. A partial solution: Block the across-the-board cut of $42.5 billion in military funds this year — the Pentagon’s portion of $85 billion due March 1 — and spread the savings over several years by tweaking military spending caps already on the books.

Because this option preserves deficit reduction without raising taxes and lets the military drawdown intelligently, a congressional majority might support it.

Pentagon leaders are sounding the alarm — warning about the impending sequester and the additional $500 billion reduction in spending over a decade. Furloughed civilian employees, extended deployments, reduced naval patrols and procurement delays, they say, will leave the military unable to perform its job and deter U.S. enemies.

Obama’s Two Choices: Good and Better

President Barack Obama must like the view from 1600 Pennsylvania Avenue right now. Politically speaking, the sky is clear, and the few clouds on the horizon have silver linings.

Because where things now stand with Congress, if he wins – he wins. And if he loses – he wins.

Getting Republicans to bend to his will on any of the banner issues this year – whether immigration reform, gun control or deficit reduction – will help enshrine him as a president of real achievement. If he fails, however, these same issues can be used as bludgeons to pound Republicans as heartless, even racist, knuckle-draggers who only want to service their rich masters.

Rubio rewrites GOP media playbook

Comprehensive immigration reform still looks uncertain on Capitol Hill as the principles laid out by Senator Marco Rubio (R-Fla.) and the other members of the bipartisan “Gang of Eight” slowly evolve into legislative text. But Rubio’s lead role in this has been crucial. Equally important, was the template Rubio provided by engaging with media of all stripes – conservative, mainstream and online – to sell the idea, and his party, to audiences outside the usual Republican comfort zone.

Diagnosing what ails the Republican Party has become a favorite Beltway pastime. But it’s clear that rebuilding the brand among Latino voters tops the “to-do” list. President Barack Obama defeated GOP nominee Mitt Romney by more than 20 points among Latino voters, according to many exit polls. The GOP has a small amount of time until this trend is set in stone.

Enter Rubio, who tackled an historically difficult issue – particularly for the GOP’s conservative wing, with whom he is identified. His immigration principles had to withstand scrutiny on the right and address the White House’s moving goalposts on the left. The first-term senator faced the challenge of dealing with both ends of the political spectrum without losing his balance.

The future of free-market healthcare

Over nearly a century, progressives have pressed for a national, single-payer healthcare system. When it comes to health reform, what have conservatives stood for?

For far too long, conservatives have failed to coalesce around a long-term vision of what a free-market healthcare system should look like. Republican attention to healthcare, in turn, has only arisen sporadically, in response to Democratic initiatives.

Obamacare is the logical byproduct of this conservative policy neglect. President Barack Obama’s re-election was a strategic victory for his signature healthcare law. Once the bulk of the program begins to be implemented in 2014 — especially its trillions of dollars in new health-insurance subsidies — it will become politically impossible to repeal. And as the baby boomers retire and Obamacare is fully operational, government health spending will reach unsustainable levels.

Can GOP blame Obama for the sequester?

More than 25 years ago, Representative Jack Kemp told me, “In the past, the left had a thesis: spending, redistribution of wealth and deficits. Republicans were the antithesis: spending is bad.”

He went on to explain, “Ronald Reagan represented a breakthrough for our party. We could talk about lower taxes and more growth. We didn’t have to spend all our time preaching austerity and spending cuts. The question now is: Do we take our thesis and move it further, or do we revert to an anti-spending party?”

We now have the answer. Republicans have reverted to an anti-spending party. Their latest cause? Austerity. Their argument? A shrinking economy is better than big government.

Populists, plutocrats and the GOP sales tax

February 1913 marked a turning point in U.S. history. One hundred years ago this month, the states ratified the 16th Amendment, clearing the way for adoption of a federal income tax. Two decades before, in 1892, the Populist Party had first put a progressive income tax on the national agenda.

The income tax faced steep conservative opposition. Since it was enacted, in fact, the political wars over income tax have never stopped. Conservatives battled against it when it was first proposed and have continued the struggle ever since. Now, Tea Party conservativism has given that fight new force.

The economist Joseph Schumpeter called tax systems the “thunder of world history.” Because if you dig beneath the rhetoric, tax systems reveal the underlying direction in which societies move. The saga of the income tax says a great deal about changes in America.

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