Why Gov. Jeff Landry might benefit from Trump's defeat

Landry's radical, pro-rich tax plan might stand a better chance if Donald Trump is not imposing 20 to 60 percent tariffs on every imported item

If Gov. Jeff Landry and his legislative allies want to enact their wide-ranging and regressive overhaul of Louisiana’s tax system, they might want to pray that Donald Trump loses the presidential election.

As you may have read, Landry wants to subject a wide range of personal services — lawn care, laundry cleaning, interior decorating, pet grooming, and to name a few — to state sales taxes. That means you could be paying an extra 4.5 percent on all those services and more right about when Trump slaps a 20 to 60 percent tax on all imported goods.

Good luck to Landry getting lawmakers to pass his tax increase while Trump plans to do the same nationally.

Twenty-five percent in new taxes is not, to my mind, something that Louisiana voters would embrace.

First, let’s talk about what Trump has in mind. Here’s what PBS wrote about his tariff plan on September 27:

As president, Trump imposed tariffs with a flourish — targeting imported solar panels, steel, aluminum and pretty much everything from China.

“Tariff Man,” he called himself.

This time, he’s gone much further: He has proposed a 60% tariff on goods from China — and a tariff of up to 20% on everything else the United States imports.

This week, he raised the ante still higher. To punish the machinery manufacturer John Deere for its plans to move some production to Mexico, Trump vowed to tax anything Deere tried to export back into the United States — at 200%.

And he threatened to hit Mexican-made goods with 100% tariffs, a move that would risk blowing up a trade deal that Trump’s own administration negotiated with Canada and Mexico.

Mainstream economists are generally skeptical of tariffs, considering them a mostly inefficient way for governments to raise money and promote prosperity. They are especially alarmed by Trump’s latest proposed tariffs.

This week, a report from the Peterson Institute for International Economics concluded that Trump’s main tariff proposals – assuming that the targeted countries retaliated with their own tariffs — would slash more than a percentage point off the U.S. economy by 2026 and make inflation 2 percentage points higher next year than it otherwise would have been.

Despite what Trump says about tariffs, the exporting country does not pay them. A tariff is a tax on the item the U.S. government imposes upon arrival, and it is almost always passed along to the consumer.

According to the right-leaning Tax Foundation: “While tariffs are often described as a tax on foreign businesses, the costs are often borne by consumers in the country that is imposing them. Tariffs directly increase the cost of domestic sales by artificially increasing the price on imports. The distributional effects (the economic burden it places on households across income levels) tend to be regressive, burdening lower-income households more than higher-income households.:

Now, imagine in the days after (God forbid) Trump’s election as president, Jeff Landry convenes the Louisiana Legislature to consider his plan to apply sales taxes to most personal services in Louisiana.

Here’s what Landry proposes, as reported in the Baton Rouge Advocate:

Landry wants legislators to approve a single flat tax of 3% to replace the current individual income system that has three rates. The governor also wants to raise the standard deduction from $4,500 per taxpayer to $12,500 to offset the higher taxes that low-income taxpayers would face by going to the flat tax. Seniors would receive a $25,000 standard deduction.

Landry also wants to collapse the three corporate income tax rates into a single rate of 3.5% and eliminate the corporate franchise tax, which is generally a tax on capital.

Landry would offset the revenue losses in part by having legislators renew the temporary .45-cent sales tax that is scheduled to expire on June 30.

Landry also wants to raise money by making a host of activities subject to state sales taxes. Those items, two of the bills show, include digital streaming services such as Amazon Prime, printing and copying services, laundry cleaning, newsletters, subscriptions to genealogical databases, interior decorating, personal fitness training services, pet grooming, spa services and tattoos.

On his Twitter page, Invest in Louisiana’s Jan Moller posted this helpful list of the wide range of services that Landry would tax:

This might sound like a good trade-off: higher sales taxes in exchange for lower income taxes. And, if you are a high-income taxpayer, it might be a great deal for you.

It would be a rotten deal for other taxpayers in Louisiana—i.e., the vast majority of taxpayers.

The flat tax that Landry proposes would result in a far more regressive tax system. As the Baton Rouge Advocate reported this week: “[T]he reductions would most benefit the wealthiest taxpayers, numbers provided by Landry’s administration show. For example, a couple making $240,000 would save $2,610 a year, while a couple earning $25,500 would save $91, per the data.”

As Moller said in a statement, “Our biggest concern is that it would create ongoing, structural budget shortfalls that would force cuts to health care, education and job-training programs that are needed for the economy to thrive. We also are concerned that it would shift the responsibility of paying taxes away from wealthy corporations and people and onto low- and middle-income households.”

He and his colleagues at Invest in Louisiana are right to be concerned. This is a soak-the-middle-class plan. It’s a balance-the-budget-on-the-backs-of-the-poor proposal. And it’s a reward-the-rich program.

So, here’s the bottom line: If Trump is elected, that $500 television might cost you another $100 to $200 in tariffs (maybe much more). Then, the next time you pay your gym dues, get the dog groomed, or avail yourself of another personal service, you’ll pay an additional 4.5 percent in Louisiana sales taxes.

That won’t bother the very wealthy voters that Landry and his team serve. Sales taxes are a tiny portion of their tax burden.

But it will matter a lot to millions of lower-income and middle-income voters, who would not only bear the brunt of Trump’s onerous, job-killing tariffs but will also be forced to pay additional, regressive taxes on a wide range of services.

Something tells me that Landry and his Revenue secretary, Richard Nelson — while they might vote for Trump — won’t be crushed if Kamala Harris wins.

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