Stelly Plan

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The Stelly Plan is a since repealed 2002 tax measure in the U.S. state of Louisiana designed to shift certain state sales taxes on food for home consumption and utilities to increases in state income taxes. Narrowly approved by voters, the law ran into criticism as middle-class taxpayers complained of paying much more in state income taxes than the amount of reduced sales taxes. The plan is named for former State Representative Victor T. "Vic" Stelly, a Lake Charles Republican, who served in the House from 1988-2004. Removal of the Stelly income tax tables began in calendar year 2009.

U.S. state constituent political entity of the United States

In the United States, a state is a constituent political entity, of which there are currently 50. Bound together in a political union, each state holds governmental jurisdiction over a separate and defined geographic territory and shares its sovereignty with the federal government. Due to this shared sovereignty, Americans are citizens both of the federal republic and of the state in which they reside. State citizenship and residency are flexible, and no government approval is required to move between states, except for persons restricted by certain types of court orders.

Louisiana southern state in the United States of America

Louisiana is a state in the Deep South region of the South Central United States. It is the 31st most extensive and the 25th most populous of the 50 United States. Louisiana is bordered by the state of Texas to the west, Arkansas to the north, Mississippi to the east, and the Gulf of Mexico to the south. A large part of its eastern boundary is demarcated by the Mississippi River. Louisiana is the only U.S. state with political subdivisions termed parishes, which are equivalent to counties. The state's capital is Baton Rouge, and its largest city is New Orleans.

A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of purchase. When a tax on goods or services is paid to a governing body directly by a consumer, it is usually called a use tax. Often laws provide for the exemption of certain goods or services from sales and use tax. A value-added tax (VAT) collected on goods and services is similar to a sales tax.

Contents

In the November 5, 2002, general election, Louisiana voters approved the Stelly Plan, listed on the ballot as Act 88-2002, actually a constitutional amendment. The tabulation was 534,989 (51 percent) to 506,938 (49 percent). [1]

During general election all or most members of a given political body are chosen. These are usually held for a nation's primary legislative body, as distinguished from by-elections and local elections.

Details of Stelly Plan

Under the Stelly Plan, the state sales tax on food for home consumption and the sales tax on natural gas, electricity, and water for residential use was lowered on January 1, 2003, from 3.9 cents to 2 cents per dollar. Taxes on those items were then eliminated on July 1, 2003. To replace revenue lost through Stelly, individual income tax brackets were adjusted upward. Because individual tax returns for taxable year 2003 were not filed until after January 1, 2004, the withholding tax tables were revised, and the new rates went into effect on January 1, 2003. [2]

Natural gas fossil fuel

Natural gas is a naturally occurring hydrocarbon gas mixture consisting primarily of methane, but commonly including varying amounts of other higher alkanes, and sometimes a small percentage of carbon dioxide, nitrogen, hydrogen sulfide, or helium. It is formed when layers of decomposing plant and animal matter are exposed to intense heat and pressure under the surface of the Earth over millions of years. The energy that the plants originally obtained from the sun is stored in the form of chemical bonds in the gas.

Electricity Physical phenomena associated with the presence and flow of electric charge

Electricity is the set of physical phenomena associated with the presence and motion of matter that has a property of electric charge. In early days, electricity was considered as being unrelated to magnetism. Later on, many experimental results and the development of Maxwell's equations indicated that both electricity and magnetism are from a single phenomenon: electromagnetism. Various common phenomena are related to electricity, including lightning, static electricity, electric heating, electric discharges and many others.

Stelly did not affect local sales taxes on food. Only food requiring preparation at home was covered by the reduction in state sales tax. Single-use portions or restaurant meals were not affected by the Stelly Plan. Prescription drugs were already exempt from sales taxes, but Stelly placed that exemption in the state Constitution. Stelly also allowed the tax owed by the individual to be distributed over the year 2003. The increase in taxpayer withholding was to have been the same as the savings realized from the elimination of sales taxes under the Stelly Plan. Taxpayers making approximately $80,000 annually saw increases in total state taxes. [2]

Repeal

After years of criticism from those who faced higher taxes as a result of the Stelly Plan, the Louisiana State Legislature in 2008 repealed Stelly. The highest income brackets were returned to the level they were prior to 2003. The tax reduction began in 2009, but the state revenue department did not alter the withholding on individual income tax tables until July 1 of that year. Hence individuals did not receive more disposable income in their paychecks until after July 1 unless they had individually requested that their employers adjust their tax schedules prior to July. The repeal of Stelly could cost the state treasury some $358 million in taxes for the 2009-2010 fiscal year and somewhat less for each year thereafter. [3]

Louisiana State Legislature

The Louisiana State Legislature is the state legislature of the U.S. state of Louisiana. It is a bicameral body, comprising the lower house, the Louisiana House of Representatives with 105 representatives, and the upper house, the Louisiana Senate with 39 senators. Members of each house are elected from single-member districts of roughly equal populations.

Stelly defenders

The Lafayette Daily Advertiser in Lafayette, which supported the Stelly Plan, described the measure as a "sensible fiscal measure . . . developed essentially to make income taxes, instead of sales taxes, the primary funding mechanism for government." [4]

Lafayette, Louisiana City in Louisiana, United States

Lafayette is a city in and the parish seat of Lafayette Parish, Louisiana, located along the Vermilion River in the southwestern part of the state. The city of Lafayette is the fourth-largest in the state, with a population of 126,143 according to 2018 U.S. Census estimates. It is the principal city of the Lafayette, Louisiana Metropolitan Statistical Area, with a 2015 estimated population of 490,488. The larger trade area or Combined Statistical Area of Lafayette-Opelousas-Morgan City CSA was 627,146 in 2015. Its nickname is The Hub City.

The Public Affairs Research Council, a business think-tank, said that the loss of income tax revenues would make Louisiana more reliant on less stable petroleum and natural gas revenues and creates the potential for a resumption of the "boom-and-bust cycle". [4]

The Baton Rouge Morning Advocate editorially opposed the Stelly Plan repeal, which it determined reflects legislators yielding to pressure from higher-income taxpayers. The newspaper questioned the repeal of a progressive income-tax-for sales-tax swap and came up with this possible explanation:

"Part of it is human nature: People benefit a little bit every day from the sales taxes eliminated in 2002 by passage of the Stelly Plan. But everybody notices when they write a larger check for state income tax. Lawmakers are responding to aggrieved, mostly affluent constituents who pay big income tax bills.

"This is a commonly cited problem with the sales tax: even the low-income folks who are hit hardest by it often don't notice, because they pay a nickel here and a nickel there rather than one big lump sum. If people don't notice the sales tax when they pay it, it's easy to understand that they wouldn't notice when (as a result of the Stelly sales tax cuts) they're not longer paying it. . . . " [5]

Stelly critics

Governor Bobby Jindal at first opposed the repeal as too costly to declining state coffers but then championed it as public reaction against the measure accelerated. [4]

Jeffrey D. Sadow, a professor of political science at Louisiana State University in Shreveport and active conservative blogger, in 2005 described the Stelly Plan, accordingly: "In essence . . . just another link in the long history of Louisiana tax policy that favors redistribution and discourages economic development. It's that kind of thinking that has gotten us into an economic mess . . . " [6]

Several lawmakers have also opposed the Stelly Plan's removal of certain state income tax deductions. Former legislators Pete Schneider of Slidell, James David Cain of Beauregarde Parish, and Peppi Bruneau of New Orleans attempted unsuccessfully to restore deductions removed for charitable contributions and home mortgage interest. [6]

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Brett Frank Geymann is a businessman from Lake Charles, Louisiana, who is a Republican former member of the Louisiana House of Representatives for District 35 in Calcasieu and Beauregard parishes.

Thomas Gaughan Carmody, Jr., is a real estate broker from Shreveport, Louisiana, who since 2008 has been a Republican member of the Louisiana House of Representatives for District 6 in Caddo and Bossier parishes.

References

  1. ↑ "Louisiana election returns, November 5, 2002". Louisiana Secretary of State. Retrieved 25 July 2012.
  2. 1 2 ""Information Available on Recent Tax Changes", January 21, 2003". revenue.louisiana.gov. Retrieved October 27, 2009.
  3. ↑ "Maria Mathews, "Stelly Plan in Action", January 27l, 2009". labudget.org. Retrieved October 27, 2009.
  4. 1 2 3 ""Stelly Plan action: Bad timing"" (PDF). Lafayette Daily Advertiser, January 5, 2009. Retrieved October 27, 2009.
  5. ↑ "The Advocate: "Keep the Stelly Plan", May 11, 2007". louisianataxblog.blogspot.com. Retrieved October 27, 2009.
  6. 1 2 "Between the Lines: "Stelly still trying to make a silk purse out of a sow's ear"". jeffsadow.blogspot.com. Retrieved October 27, 2009.
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