Raising Taxes Norquist-style and the Republican National Backfire
In Louisiana’s 2015 legislative session, Grover Norquist of Washington, DC-based Americans for Tax Reform (ATR) was in charge of the Louisiana budget. Then-Governor Bobby Jindal had apparently signed an agreement to not raise taxes under any circumstances, and he was requiring the Louisiana legislature to advance a 2015-16 budget that would garner Norquist’s approval.
Keep in mind that no Louisiana taxpayer voted to put the Louisiana budget under the auspices of Norquist. But then, Jindal had been running for president for years by then, and he wanted to present himself to the nation as *not having raised taxes*.
In truth, Jindal only cornered the state legislature into disguising the taxes— $350 million worth– and to appease Jindal (who wanted to appease Norquist), the 2015 Louisiana legislature played a game by concocting a fake tax credit to go along with a nonexistent higher ed fee such that the fake fee-credit combo would “offset” the $350 million in new taxes– all so that obvious-presidential-hopeful Jindal could stand before America and declare that he had not raised taxes. The 2015 fake fee-credit legislation is called Louisiana’s SAVE Act. Here is how the Advocate’s Stephanie Grace described the SAVE Act in June 2015:
Senate Bill 284 by Senate Finance Chairman Jack Donahue, would impose a $1,500 fee on students enrolled in Louisiana’s public colleges. But rather than pay it, they would receive an equivalent tax credit.
Then what’s the point, you might ask?
To stay on the right side of Jindal’s no-new-taxes line in the sand, the product of his exacting interpretation of Washington group Americans for Tax Reform’s no-new-taxes pledge. Because the roughly $350 million the measure would generate — if anyone were to pay it — would come from a fee, it wouldn’t count as a tax increase. But the money refunded via the tax credit — again, on paper — could be counted as an offset to new revenue raised elsewhere, something Jindal has demanded. [Emphasis added.]
The irony of Jindal’s Norquist-pleasing plan was that it unleashes the possibility of boundless tax increases hidden behind fake tax credits– which ten of Louisiana’s Republican lawmakers pointed out to Norquist in June 2015.
Apparently, since the SAVE ACT was on paper, to Norquist, it was real. So, to pacify Jindal, the 2015 legislature passed this bogus tax-credit bill.
As it stands, a number of Republican governors and 2012 presidential hopefuls had declared allegiance to Club Norquist, with all Republican contenders for the 2012 nomination refusing to raise taxes even if such was accompanied by tenfold spending cuts. Moreover, in the 2016 race for the Republican nomination, Marco Rubio (who is now endorsed by Jindal, though such endorsement has not made a ripple in the media), Ted Cruz, Ben Carson, and John Kasich have all signed Norquist’s “no tax” pledge.
That only leaves bizarre-yet-popular Republican spectacle, Donald Trump.
So, for all of its Norquist love, it seems that the career Republican presidential hopefuls are taking a beating in the polls from the billionaire reality TV star. On February 29, 2016– literally on the eve of Super Tuesday– RealClearPolitics has Trump with a 15.8-point lead for the Republican presidential nomination– and I’ll bet the Republican National Party is likely both perplexed and repulsed.
Regarding if the election were to happen now, RealClearPolitics also has a pretty close game between Trump and Democrat Hillary Clinton (Clinton +2.8); Cruz and Clinton is even closer (Cruz +.8), with Rubio and Clinton showing the greatest point spread (Rubio +4.7).
On February 26, 2016, Huffington Post writer and Fiscal Strategies Group president, David Paul, reflects on the intersection of Trump brashness and Norquist non-negotiation:
While there continued to be candidates from the establishment and conservative wings of the party, overall Republican political strategy centered around fealty to the commitments that Norquist articulated. The notion of the Republican Party as a big tent became tightly circumscribed. It was no longer enough to be a person of balance and prudence; in Norquist’s world, to be a Republican candidate began with a commitment to certain non-negotiable positions, literal adherence to a party line.
Against that presumption of fealty to certain issues, Republican pundits were mortified to watch as Donald Trump trampled on one Republican shibboleth after another. He suggested the rich should pay higher taxes. …He said the Iraq war was a huge mistake and he blamed George W. Bush for 9/11. And, most of all, he suggested that our entire political system has been corrupted by large individual and corporate contributors who give millions and millions of dollars to political campaigns, and get billions and billions of value back in return.
…Trump trounced the Republican field in every voter demographic category, among moderates, conservatives, evangelicals and independents, among all ages and education levels. It is not just that Trump didn’t care about what GOP elites thought he was supposed to care about, but that Republican voters didn’t either. After two decades of stagnant middle class incomes, Grover Norquist’s rules and Ted Cruz’s conservative patter had simply lost much of their salience to many Republican voters.
As for the aftermath of now-former-Louisiana Governor Jindal’s gaming the “no tax” pledge (with Norquist approval) via the SAVE Act: The 2016 Louisiana legislature is left to clean up a massive budget mess as it seeks to both cut money and generate quick revenue to repair a critical, $900 million shortfall for the 2015 budget– and face an anticipated $2 billion deficit in 2016.
Meanwhile, Moody Investors has downgraded Louisiana’s credit rating from Aa2 to Aa3, for the first time since Hurricane Katrina. According to Rebekah Allen of the Advocate, only two states have a lower credit rating than Louisiana: New Jersey and Illinois.
It is clear from Moody’s own report that Louisiana’s credit downgrade is directly affected by the Jindal’s budgetary ineptness:
Moody’s Investors Service has downgraded Louisiana’s rated debt by one notch, affecting approximately $7.3 billion in outstanding debt. The state’s general obligation bonds were downgraded to Aa3. Lease appropriation bonds have been downgraded to A1, A2 and A3, all one notch from their prior ratings. The Aa3 GO rating reflects the state’s rapidly deteriorating revenue collections due in part to the continuing low oil price environment, a looming fiscal 2017 gap that could be as large as 20% of general fund revenues, and the effects of years of structural imbalance on the state’s reserves and liquidity. [Emphasis added.]
The lowered Moody rating came even as the 2016 Louisiana legislature is in special session to address the 2015-16 budget shortfall. But one great advantage that the 2016 Louisiana legislature has is no more Norquist to appease at Jindal’s demand.
And the do-nothing SAVE Act is slated for repeal.
However, let the nation take a lesson. Just because a candidate says that he (or she) has pledged to not raise taxes, know that even the Americans for Tax Reform system can be gamed for boundless tax hikes if legislators are willing to offset the tax hikes with fake fees and associated credits– and that anti-tax godfather Norquist would apparently be fine with it.
As for Trump’s popularity in the polls: Yes, he is certainly a nightmarish, reality-TV invasion of the Republican primary. However, the decades-long Republican practice of bowing to Norquist is arguably contributing to making the likes of Donald Trump look attractive to Republican voters.