News That Matters to Us

Puffing up retirees

By Christopher Tidmore, Political Columnist

March 14, 2005

South Carolina Gov. Mark Sanford proposed recently lowering the top income tax rate of his state from 7% to 4.75%. What surprised many observers across the country is how much support the GOP chief executive had on both sides of the aisle.

Of course, his plan is a measured proposal, only cutting rates as surpluses and other tax revenues allow for their gradual reduction, yet the widespread support that Sanford enjoyed came more from his worries about South Carolina's competitiveness with other Southern states than a Reaganesque concept of supply-side economics.

Sanford believes that the tax cut would a "great economic incentive tool." It would prove that his state had improved its business climate to a greater degree than its equally pro-business Southern neighbors. The governor' s allies quote noted Ohio University economist Dr. Richard Vedder who pointed out that "states that cut income tax rates experienced a higher job growth than states that raised income tax rates in the 1990's."

South Carolina hardly ranks alone in states of the Old Confederacy that have constantly worked to improve their business climates through tax cuts. Yet, in comparison, Louisiana's five-year phase-out of the corporate franchise tax on debt and the sales taxes on machinery and equipment pales. As the Pelican State attempts to equal the business tax climate of its neighbors, they cut taxes even further, and we fall further behind. Louisiana must act to capture national attention - and soon.

For that reason, both politically and economically, it behooves Gov. Blanco's adversaries in the legislature and the media to oppose the use of her dollar a pack tax hike on cigarettes for increased teacher pay - and instead use any realized revenues to attempt to phase out the income tax on retirees.

The $120 million figure is exactly the sum that would replace state income taxes for those over the age of 61 and six months (according to surveys done for former gubernatorial candidate Buddy Leach). Such a proposal would cut across ideological lines as liberal and African-American legislators would find the temptation to aide the poorest sector of Louisiana society (and the one most likely to vote) hard to ignore. Economically, it would send the message that not only has the Pelican State made advances on the tax front, but has resolved to actively sell the one industry in few other Southern states could compete, the quality of life.

Removing income taxes would transform Louisiana into that elusive of regions, the retirement haven. The rich and recent freed from work constraints would come for our music, our food, our (warm) weather, and our attitude of laissez le bon temps rouler. But, they would come confident in the knowledge that their nest eggs were secure from the tax man, either as they lived - and thanks to the repeal of the Louisiana Estate Tax - as they died.

Matched with our low property taxes, thanks to the Homestead Exemption, and our low cost of living, Florida and Arizona would find the financial atmosphere hard to beat. Former Louisianans who left for financial reasons could return for the same justification. Those Baby Boomers who enjoy the fat retirement packages from their active jobs in the Northeast could enjoy their spoils in the land of Mardi Gras with little threat to their 401k's.

The economy would be spurred the construction and service sector jobs that would be created to cater to this new affluent retirement class, and the problem of out-migration would lessen as the new elderly citizens moved into the state. The worry of losing a congressional seat would diminish over time.

Politically, though, the idea of removing the income tax on retirees provides the Republicans with an issue that beats Gov. Blanco's call to boost teacher pay by $2000 per person. It pits her constituents amongst the elderly against her allies in the educational unions, a politically untenable position.

Republicans can also advocate teacher raises, insisting that teach pay hikes come from the general budget. Any new tax increase, though, should be matched with a proportional tax cut, a move that would increase the state's competitive image nationally.

Without this assurance of a quid pro quo, Republicans could resist the cigarette tax increase without seeming anti-education. In the end, though, simply opposing the cigarette tax hike puts the GOP in the unenviable position of defending Phillip Morris at the expense of the children.

If the Republicans puff up their proposal, who could charge them with a lack of compassion? On the contrary, the retirees who watched their tax burden drop to zero would praise their charity to heaven and certainly cast their ballots for the GOP when the party makes a bid to take over the State Legislature in three years.



		Puffing up retirees By Christopher Tidmore, Political Columnist March 14, 2005 South Carolina Gov. Mark Sanford proposed recently lowering the top income tax rate of his state from 7% to 4.75%. What surprised many observers across the country is how much support the GOP chief executive had on both sides of the aisle. Of course, his plan is a measured proposal, only cutting rates as surpluses and other tax revenues allow for their gradual reduction, yet the widespread support that Sanford enjoyed came more from his worries about South Carolina's competitiveness with other Southern states than a Reaganesque concept of supply-side economics. Sanford believes that the tax cut would a "great economic incentive tool." It would prove that his state had improved its business climate to a greater degree than its equally pro-business Southern neighbors. The governor' s allies quote noted Ohio University economist Dr. Richard Vedder who pointed out that "states that cut income tax rates experienced a higher job growth than states that raised income tax rates in the 1990's." South Carolina hardly ranks alone in states of the Old Confederacy that have constantly worked to improve their business climates through tax cuts. Yet, in comparison, Louisiana's five-year phase-out of the corporate franchise tax on debt and the sales taxes on machinery and equipment pales. As the Pelican State attempts to equal the business tax climate of its neighbors, they cut taxes even further, and we fall further behind. Louisiana must act to capture national attention - and soon. For that reason, both politically and economically, it behooves Gov. Blanco's adversaries in the legislature and the media to oppose the use of her dollar a pack tax hike on cigarettes for increased teacher pay - and instead use any realized revenues to attempt to phase out the income tax on retirees. The $120 million figure is exactly the sum that would replace state income taxes for those over the age of 61 and six months (according to surveys done for former gubernatorial candidate Buddy Leach). Such a proposal would cut across ideological lines as liberal and African-American legislators would find the temptation to aide the poorest sector of Louisiana society (and the one most likely to vote) hard to ignore. Economically, it would send the message that not only has the Pelican State made advances on the tax front, but has resolved to actively sell the one industry in few other Southern states could compete, the quality of life. Removing income taxes would transform Louisiana into that elusive of regions, the retirement haven. The rich and recent freed from work constraints would come for our music, our food, our (warm) weather, and our attitude of laissez le bon temps rouler. But, they would come confident in the knowledge that their nest eggs were secure from the tax man, either as they lived - and thanks to the repeal of the Louisiana Estate Tax - as they died. Matched with our low property taxes, thanks to the Homestead Exemption, and our low cost of living, Florida and Arizona would find the financial atmosphere hard to beat. Former Louisianans who left for financial reasons could return for the same justification. Those Baby Boomers who enjoy the fat retirement packages from their active jobs in the Northeast could enjoy their spoils in the land of Mardi Gras with little threat to their 401k's. The economy would be spurred the construction and service sector jobs that would be created to cater to this new affluent retirement class, and the problem of out-migration would lessen as the new elderly citizens moved into the state. The worry of losing a congressional seat would diminish over time. Politically, though, the idea of removing the income tax on retirees provides the Republicans with an issue that beats Gov. Blanco's call to boost teacher pay by $2000 per person. It pits her constituents amongst the elderly against her allies in the educational unions, a politically untenable position. Republicans can also advocate teacher raises, insisting that teach pay hikes come from the general budget. Any new tax increase, though, should be matched with a proportional tax cut, a move that would increase the state's competitive image nationally. Without this assurance of a quid pro quo, Republicans could resist the cigarette tax increase without seeming anti-education. In the end, though, simply opposing the cigarette tax hike puts the GOP in the unenviable position of defending Phillip Morris at the expense of the children. If the Republicans puff up their proposal, who could charge them with a lack of compassion? On the contrary, the retirees who watched their tax burden drop to zero would praise their charity to heaven and certainly cast their ballots for the GOP when the party makes a bid to take over the State Legislature in three years.