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Jindal proposes elimination of income taxes in Louisiana

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January 11, 2013


By Phil Sletten

BATON ROUGE, Louisiana: Louisiana Governor Bobby Jindal (R) proposed eliminating the corporate income tax and personal income tax in a statement outlining broad tax reform goals. The statement said the governor's office planned to work with state legislators on the details of the tax reform and that Governor Jindal wants "to keep the sales tax as low and flat as possible."[1]

Early reports suggested that raising the sales tax from 4 percent to 7 percent would be necessary fill the budget gap left by the elimination of personal and corporate income taxes.[1] State revenue forecasts estimated that these two taxes would bring in $2.92 billion in 2013. These same forecasts estimate that sales tax revenue in 2013 would be $2.6 billion at the current 4 percent tax rate. Officials in Governor Jindal's administration said that a 7 percent sales tax would be on the high end of their considerations, noting that eliminating exemptions and expanding the tax base can keep the overall rate from rising to 7 percent.[2]

Department of Revenue Executive Counsel Tim Barfield was quoted by The Times-Picayune as praising sales taxes for increasing taxpayer choice. "Sales tax often involves a lot of flexibility ... and gives the people a lot of choices in how to do things. ...It's easier for our taxpayers to make decisions to respond and address the changes in the structure," said Barfield.[2] In his statement, Governor Jindal called tax reform a way to improve the state's business climate and "put more money back into the pockets of Louisiana families." He called for the elimination of state personal and corporate income taxes to be "revenue neutral."[1]

Some sales tax exemptions, including those on groceries, medicine, and utilities for residential customers, are written into the Louisiana Constitution, so they are not likely to be altered. These exemptions accounted for approximately $700 million of the $2.5 billion worth of sales tax exemptions in Louisiana.[2]

The proposal has been called regressive by critics, as sales taxes disproportionately affect low-income residents relative to high-income taxpayers. State Senator Karen Peterson (D) called the reform proposal a "tax increase," saying, "This tax increase will disproportionately affect the lower-income people in this state."[2] Peterson also expressed concerns that a tax reform may end up bringing less money into state coffers. State House Representative John Edwards (D) told The Times-Picayune that, "This proposal is extremely regressive in nature and we'd have to be very, very careful before we take that particular step."

Economist and Louisiana State University Professor James Richardson remarked that, “We’d merely be shuffling the way we pay taxes. ...Higher sales taxes would make the system more regressive.”[3] Executive Counsel Barfield noted that the state could use several mechanisms, including the Earned Income Tax Credit, to make tax reform less regressive.[4][2]

Louisiana political analyst John Maginnis noted that this initiative by Jindal may be tailored with an eye toward higher national political office.[5]

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