Owen Courreges: Mayor Landrieu’s completely predictable, completely unsustainable tax hikes

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Owen Courreges

Did you hear the news? Mayor Landrieu is proposing… (drum roll please)… tax increases!

This shocking development stems in large part from the consent decrees with the U.S. Justice Department over the widely-acknowledged and widespread constitutional violations routinely committed by the New Orleans Police Department and the Sheriff’s Office vis-à-vis Orleans Parish Prison.  Those settlements have hefty price tags attached.

Who could have predicted this?  Not to toot my own horn, but I certainly did.

In February of last year, I noted that “Landrieu is staring down an unpopular decision” and that “[g]iven his background, it would appear likely that he will shoot for tax or fee increases at least as a part of any plan to pay for the consent decrees.”  Landrieu, after all, is no stranger to pushing for higher taxes.

As I noted at that time, Landrieu’s last-minute efforts to fight the NOPD consent decree were shameless.  It hardly would have required clairvoyance to anticipate the expenses that were coming down the pipeline.  Landrieu’s sudden case of buyer’s remorse amounted to little more than a transparent ploy to shift the blame to Sheriff Gusman and the federal government for his own lack of planning.

Adding insult to injury, New Orleans has also been saddled with unsustainable public pension obligations bestowed by previous generations of incompetent public leaders (including Landrieu’s own father).  Essentially previous generations of New Orleanians thought it would be a hilarous joke to underpay public employees while promising gold-plated pensions that would, naturally, be paid for by succeeding generations.  Although such inter-generational theft is immoral and ought to be illegal, Landrieu has regrettably tried and failed in his attempts to fight those obligations in Court.

Alas, Landrieu and his predecessors have screwed the proverbial pooch on this, and nothing is going the change that.  Hence, it comes as little surprise that Landrieu setting his avaricious eyes on the billfolds of New Orleans taxpayers.

Landrieu’s plan encompasses three separate tax increases, which I will henceforth refer to as the “three strikes.”

First, Landrieu plans to increase the hotel tax from 16.44% to 18.27%.  This increase, which would be the second in two years, will yield the second-highest hotel tax in the entire country after New York.  New York, take note, is just about the most unaffordable city in the country.

Although bilking tourists is a favorite pastime of many of our citizens, there is a point at which a higher hotel tax will start to impact the tourism industry, and I’m far from confident that this tax doesn’t cross a line.  We depend on tourism far more than New York does; it’s starting to sound like we’re trying to kill the golden goose.

That’s strike one.

Secondly, Landrieu plans on lobbying the state legislature to pass a law allowing the city to enact a 75 cent tax on cigarettes and all other tobacco products within Orleans Parish.  Cigarette taxes, like hotel taxes, are a favorite resort of opportunistic politicians dealing with budgetary shortfalls.  Hotel taxes are pitched as targeting nonresidents, and who cares about them and their crocks and their fanny packs? Meanwhile, cigarette taxes are pitched as targeting smokers, who have a bad habit and should just quit anyway.  A win-win, right?

While I’m not a smoker myself, I also understand that tobacco is rather addictive.  Demand for it is fairly inelastic, which creates a reliable revenue stream for tobacco taxes.  In other words, it’s hard to quit, and increasing the price slightly, while a financial hardship to smokers, is unlikely to force them to quit or even cut down significantly.  Moreover, smokers tend to be poorer on average and the tax is strictly regressive, falling far more on the shoulders on those who can least afford it.

Even worse, Landrieu is proposing a new citywide cigarette tax at the same time that President Obama is clamoring to raise the federal excise tax on tobacco products to expand preschool education.  That means two major cigarette tax increases could hit at almost the same time.

Naturally, proponents of such increases argue that cigarette taxes are truly designed to deter smoking, but this argument is belied by the use of cigarette tax revenues as a reliable source of income for specific government needs and projects.  Landrieu can’t claim on one hand that he’s discouraging a bad habit while simultaneously hoping that smokers don’t quit so that he can fill a whole in the budget with a new, regressive tax.

That’s strike two.

Finally, Landrieu is pushing for increases in both the police and fire property tax millages.  This is where Landrieu’s proposals are likely to be the least popular.  These millages are “special” tax millages, meaning that they are owed on the full value of the property regardless of whether a homestead exemption is claimed.  Thus, these increases will fall on all homeowners, even those whose homes are assessed at less than $75,000.

The problem here is that New Orleans homeowners are tapped out.  Post-Katrina increases in the costs of insurance, taxes, and utilities have been onerous to say the least.  The increase Landrieu is proposing is hardly massive, but combined with all the other increases homeowners have been facing each and every year, it appears as another nail being driven into the coffin.  It costs too much to live here and the jobs pay far too little.

That’s strike three.

Landrieu’s out – out of his mind, that is, if he expects New Orleanians to blithely accept these tax increases.  For all of Landrieu’s talk of having cut city finances down to the bone, he has also promoted waste and largesse, particularly within his own office.  He claims that there are no more cuts to be made.  I don’t believe him.  He’s taking the easy route, as I suspected he would.

The budgetary problems we face cannot be fully placed at Landrieu’s feet, but how he deals with those problems is something he must personally own.  Landrieu’s consistent response to problems has been to make the citizens of New Orleans pay more.  I think at last we’ve had enough.

Owen Courrèges, a New Orleans attorney and resident of the Garden District, offers his opinions for UptownMessenger.com on Mondays. He has previously written for the Reason Public Policy Foundation.

15 thoughts on “Owen Courreges: Mayor Landrieu’s completely predictable, completely unsustainable tax hikes

  1. Spot on, as usual. Part of the problem with the Hotel tax is that the state receives the majority it (for historic anti-New Orleans reasons). It’s our sidewalks, streets, and police that protect the tourists, yet the state takes the bulk of the revenue they bring in. Landrieu should be fighting to get more of the existing money instead of raising the tax to a new level.

  2. I agree, good reporting Owen. I moved back to New Orleans five years ago from Los Angeles, where I had been for 12 years. And it was cheaper to live in L.A., as a property owner, than it is in New Orleans. Keep on Mitch, please. He thinks that just because there was no better choice in recent elections, that he can do as he pleases. Tell him that it just is not so.

  3. Worse thing about the proposed tax increases is that the majority of the citizens paying those taxes will see zero benefit from the increase. I am never against paying higher taxes for better services, but to pay more to keep the same terrible service in unbearable. From what I understand the mayor is proposing these bills in Baton Rouge in order to give the city council more flexibility. Honestly, I think that a tax on alcohol sales would be a better approach than taxing cigarettes or increasing the millage. Specifically, alcohol or beer sold in single 1 unit portions from convenience stores and supermarkets should be taxed, instead of the people who are paying to own property in the city.

  4. I for one am surprised he’s looking to have the tourists foot a little bit of the bill this time. It seems his #1 goal has been enticing tourists here while screwing his constituents as necessary, whether it be street cameras, doubling sanitation fees, raising SWB fees, stacking the limited police resources in the FQ and leaving other neighborhoods to fend for themselves, repaving primarily FQ streets that weren’t nearly the most in need, etc.

    While I’m no fan of the mayor (obviously), what are the realistic options aside from vague “spending cuts?” (btw, I’m all for cutting the existing police chief’s pension.) And if homeowners are “tapped out” why are houses lasting 24 hours or less on the market? There’s an obsession with moving to/living here that doesn’t seem anywhere close to plateauing. Don’t mistake me, I think I pay enough taxes. But if every dollar of it went to rebuilding the police force, I’m not sure how much passion I could have against the idea..

    • Craig,

      I think spending cuts are the way. I’d like to see the NOPD internalize the costs of the consent decree. We haven’t been underfunding the NOPD relative to other departments in the region (I discussed this in a previous column and compared our per capita police spending to other cities). Accordingly, why can’t the department deal with the costs of the consent decree internally?

      As far as OPP, I think Landrieu should have been ahead of the problem. First of all, he shouldn’t have settled the NOPD suit without a commitment of federal dollars to free up money for the impending OPP settlement. That was poor planning. Secondly, he should have been boosting funding to the OPP from the time he entered office while reducing its expenses (i.e., making additional proposals to limit OPP’s population, such as barring arrests for more minor offenses — we’re still keeping people in prison, sometimes for weeks at a time, for trivial matters like suspended licence violations).

      Ultimately, though, I think the issue could have been dealt with using spending cuts. Absent that, I think forcing more tax fairness instead of just raising rates would have been in order — in the past I’ve noted that nonprofits are often getting a free ride by keeping moldering properties that they don’t need and don’t use but will not sell. It’s extremely commonplace. I’m sure there are other creative, far more fair solutions that could have been employed. However, Landrieu is lazy and immediately resorts to passing on costs to those who can’t afford them.

      And when I say homeowners are “tapped out,” I don’t mean that their homes aren’t worth anything, I mean that they can’t afford to continually face skyrocketing expenses associated with home ownership. It’s a slap in the face to raise the special property taxes now in the context of that.

  5. The continuing war on the middle-class homeowner. The tectonic forces driving and keeping these people out of America’s great cities is one of the great scandals of our age.

  6. How about Landrieu start with “Eliminating the City/State issued Credit Cards for Gas, Food & Drinks” items purchased by the TAX PAYERS!!!!! They make enough money to purchase these items themselves, Ijs.. Look at that budget cut too, balance it out with the citizens and the crooks… Oops I meant politicians, Lol… 🙂

  7. If the $7.50 a carton tax increase does not induce any New Orleans smokers to quit, will it drive them to Jefferson Parish to buy their smokes there?

    • JoeBigEasy,

      Good point. I had thought about this — Is Landrieu overestimating both the revenue impact and economic impact of the cigarette tax because he isn’t considering how many people are going to start stocking up in bordering parishes? Orleans isn’t that large. It doesn’t take long to get to a parish border.

  8. If non-profits and churches would pay their fair bit on property that is not used for their raison d’être then the tax rate overall could be decreased. Particularly churches that have rental properties, up to and including commercial properties that they lease out.

    I’ve heard numbers in the range of 30-50% decrease to maintain an equal level of funding because currently only 30% of properties in New Orleans pay property tax at all.

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