World Library  
Flag as Inappropriate
Email this Article

Stelly Plan

Article Id: WHEBN0024865220
Reproduction Date:

Title: Stelly Plan  
Author: World Heritage Encyclopedia
Language: English
Subject: Vic Stelly, Government of Louisiana, Thomas G. Carmody, Moss Bluff, Louisiana, Steve Scalise
Collection: 2002 in Louisiana, Government of Louisiana, Louisiana Law, Taxation in the United States
Publisher: World Heritage Encyclopedia
Publication
Date:
 

Stelly Plan

The Stelly Plan is a since repealed 2002 tax measure in the U.S. state of Louisiana designed to shift certain state sales taxes on food for home consumption and utilities to increases in state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 proposal soon 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.

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]


Contents

  • Details of Stelly Plan 1
  • Repeal 2
  • Stelly defenders 3
  • Stelly critics 4
  • References 5

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]

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. Louisiana does not exempt over-the-counter drugs from sales tax, but such items are exempt in neighboring Texas. 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]


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]

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]

References

  1. ^ "Louisiana election returns, November 5, 2002". Louisiana Secretary of State. Retrieved 25 July 2012. 
  2. ^ a b 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. ^ a b c ""Stelly Plan action: Bad timing"".  
  5. ^ : "Keep the Stelly Plan", May 11, 2007"The Advocate". louisianataxblog.blogspot.com. Retrieved October 27, 2009. 
  6. ^ a b "": "Stelly still trying to make a silk purse out of a sow’s earBetween the Lines". jeffsadow.blogspot.com. Retrieved October 27, 2009. 
This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and USA.gov, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for USA.gov and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
 
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
 
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.
 


Copyright © World Library Foundation. All rights reserved. eBooks from Project Gutenberg are sponsored by the World Library Foundation,
a 501c(4) Member's Support Non-Profit Organization, and is NOT affiliated with any governmental agency or department.