Some Louisiana Republicans have a question for Gov. Bobby Jindal: Who runs the state’s tax policy — the governor or Grover Norquist?

Jindal, who is exploring a 2016 presidential run, is fighting with his own party over how to fill a $1.6 billion budget hole. But like many GOP-ers, he is eager to preserve his anti-tax bona fides.


Enter Norquist, the activist who specializes in deciding which revenue hikes should count as tax increases, and which might be labeled with such euphemisms as hiking fees, closing loopholes — or in this case, “cutting spending.”

The administration recently sought out Norquist’s group, Americans for Tax Reform — which has persuaded nearly every elected Republican, including Jindal, to sign a pledge to shun tax hikes — to ensure a new revenue-raising plan isn’t considered a tax hike, according to several Louisiana Republicans. Jindal’s plan guts half-billion dollars in refundable tax credits for businesses and increases levies on cigarettes.

At the same time, a Norquist emissary allegedly gave a thumbs down to a competing bipartisan proposal to help fill the gap by nixing Hollywood tax credits, saying that could constitute a tax increase.

“We shouldn’t have a Washington group dictating how we solve our $1.6 billion budget problem,” said GOP state Rep. Tim Burns, who was at the meeting. “It’s very disconcerting — that he’s going to threaten to veto anything we do that (Norquist’s Americans for Tax Reform) ATR doesn’t like.”

The intraparty squabble highlights Jindal’s eyes on 2016 — and the power of Norquist.

It’s also a reminder that what some think is good state policy can clash with smart politics — particularly in a GOP presidential primary, where Jindal’s would-be opponents might bulldog him for raising levies.

Jindal spoke in Washington on Monday at the center-right American Action Forum, where he dodged a question on ATR’s role in his budget but said: “I am against tax increases, period. … Now … there are refundable tax credits that exceed a taxpayer’s tax liability … folks getting large checks from the state of Louisiana. In my mind that’s spending. … Some of that’s corporate welfare.”

The Jindal administration told POLITICO earlier that the governor reached out to the group only because he “takes his pledge to the people of Louisiana not to raise taxes seriously.”

“We consult with Americans for Tax Reform on different ideas just as we consult with many other groups interested in tax policy,” according to a statement.

Norquist’s top state expert Patrick Gleason brushed off the criticism, saying the group consults with state officials “all the time” about tax issues, and they “don’t see why it’s a surprise that Louisiana talks to us about tax policy.”

The group has taken likely GOP front-runner Jeb Bush to task for being one of the rare Republicans not to sign the pledge and they’re not shy about reminding candidates of the fate of President George H.W. Bush, who reneged on a pledge not to raise taxes and then lost reelection.

Perhaps that’s why Jindal consulted with Norquist so closely, asking him to weigh in on which proposals are technically tax increases.

Jindal needs to fill the budget shortfall by this summer and some state lawmakers decided they can’t do with spending cuts alone; they need new tax revenue, too.

Jindal’s administration found a novel way to do it. On Feb. 27, it proposed a budget with changes to about a dozen refundable tax credits — business subsidies for things like inventory, use of solar energy, for research and milk producers — to make them nonrefundable. That means if companies received a larger tax credit than they owe in state taxes, they would no longer receive a tax refund.

The plan would raise $526 million.

Jindal also floated a tax swap of sorts, proposing to raise $100 million by increasing levies on cigarettes from 36 cents to 83 cents. That pot of cash, combined with a newly proposed “excellence” fee on college tuition, would pay for a new tax credit for college students.

Both were given a thumbs-up by ATR, which gave Jindal cover on the national stage when some in the local business community called the move a tax hike.

The administration, with the influential group at its back, argued that neither was a tax hike, per se: Axing refundable credits is actually a “spending cut,” they said. On the cigarette tax, the administration noted that under ATR principles, a tax hike isn’t really a tax hike if it’s accompanied by a tax cut.

Louisiana Department of Revenue Secretary Tim Barfield said in an interview that he’d spoken with the group about “pros and cons” of various ideas in the budget.

“From time to time, I will run specific ideas and proposals by them. … [Some proposals don’t] always fit within the general guidance they have, and so we’re always trying to get their input to see where they come out on it,” he said.

At first, Louisiana Republicans responded by scratching their heads at Jindal’s definition of tax hike.

Many had backed curbing other deductions and credits to save money, including tax breaks for the movie industry that cost that state $200 million to $250 million a year, but that bipartisan idea wasn’t in the budget.

“I want to get a good definition today for what your administration says a tax is,” said state Rep. Lance Harris, head of the Republican Caucus in the Louisiana House, after the budget release.

GOP lawmakers then pressed the matter at a Baton Rouge retreat with the administration just over a week ago, and Jindal’s top tax people gave Harris an answer: Department of Revenue officials drew a line in the sand on taxes, saying nothing Norquist’s group deemed a tax hike would be acceptable, according to several attendees present.

They “plainly stated, in no uncertain terms, that the administration won’t agree with any proposal which doesn’t get the seal of approval from ATR and the governor will veto any proposals that don’t have the ATR’s approval,” wrote state GOP Rep. Jay Morris in an unusual email laying out the private spat to constituents on March 8.

“ATR is dictating what proposals or ideas which will be considered by the Governor, which proposals he will veto, and which he will not,” he wrote.

GOP lawmakers and Jindal have clashed on taxes before. The Legislature forced the governor to shelve his goal to eliminate the income tax several years ago, also accusing him of trying to flex his muscles for a national audience.

And the governor has vetoed tax increases, including a renewal of a four-cents tax per pack of cigarettes. Lawmakers had to attach the tax to a constitutional amendment that Jindal couldn’t veto to get it on the books.

According to several lawmakers at the retreat, Jindal’s staff also told them that Norquist’s group approved elimination of an inventory tax credit altogether, beyond just its refundable portion. The credit currently is meant to offset a local tax on inventory that many argue cripples business but is also a big source of local revenue. Years ago, the state sought to offset the cost of the local tax by offering a credit.

Several Republicans said they scoffed at the idea, saying, without the credit, businesses will suffer. Why not scratch the Hollywood subsidies instead, they asked.

The essence of the response they got: Because Norquist says that’s a tax hike.

“If you’re going to approve refundable-to-nonrefundable, you should approve [curbing] the movie tax credits, too, maybe the solar tax credits and really look at any other tax expenditure items to be spending,” Burns said. “It sounds to me like their policy decisions are a bit arbitrary.”

The tax group wouldn’t comment on the movie tax credit for this story, though Barfield said Norquist staff told Louisiana officials it was a tax increase since it technically reduces tax liability owed.

Norton Francis at the Tax Policy Center agreed the two are different — one spending, the other tax. But he pointed out that the controversial movie tax credits are actually transferable — meaning movie companies that don’t have much tax liability can sell them off to other taxpayers and get money in return, making him question the difference.

“I don’t draw the distinction between them, and it seems to me like the inventory and movie credit … would be equivalent,” he said.

Some Republican lawmakers also object to the cigarette tax for education tax credit swap. They don’t see the need for a workaround and would prefer to just increase cigarette taxes and use the money for education.

“Somehow creating this convoluted paper trail allegedly renders this proposal ‘revenue neutral’ and thus not a tax increase, even though the person buying cigarettes pays more and the college [student] gets more money,” said Morris.

While negotiations on the budget are ongoing, there’s already talk of trying to override a Jindal veto should he block tax increases.

But in the meantime, the administration says it’s just doing its job.

“At the end of the day, the ultimate judgment will be with the governor and his administration, whether it’s a tax increase or not, as well as the pledge he made to the voters of Louisiana,” Barfield said. “And though we have some challenges from a budget standpoint, he’s committed to follow through to that pledge.”

Follow @politico