Political Horizons: Tax figures questioned

S oon after the administration gave a peek of its plan to revamp Louisiana’s tax system by abolishing income taxes and replacing those revenues with increased sales taxes, Gov. Bobby Jindal’s massive and highly paid staff of press agents was full of advice on how best to report the proposal.

For instance, Jindal’s communications director, Kyle Plotkin, emailed reporters “to make sure everyone caught” the administration’s press release “before they file their stories.” The administration had estimated that taxpayers would pay less after the tax swap. For instance, joint filers making between $50,000 and $69,999 a year will see “a $832 reduction in their yearly tax burden.”

The theme was picked up by Jindal’s supporters among the Internet bloggers and the commentators who post online comments at newspapers websites.

The numbers came from state Revenue Department “estimates” based on the U.S. Consumer Expenditure Survey, which measures retail purchases by different variables, such as income, age and sex.

Informal requests for how the administration arrived at those figures were ignored. An official public records request produced no actual documents, but did include a one-page memo explaining that the administration’s formula included a handful of items “subject to sales tax in Louisiana.”

The Northern and Central Louisiana Interfaith councils, a group of clergy, found that the administration’s “tax burden analysis” only calculated the 1.88 percent projected increase in the state’s 4 percent sales tax. The ministers discovered that the Revenue Department did not include any consumer impacts associated with “expanding” the tax base, that is, charging taxes on services and items that previously had not been taxed.

State Department of Revenue Counsel Tim Barfield, Jindal’s point man in the tax overhaul, said in a prepared statement that “more than 80 percent of the expanded sales tax base does not impact families and individuals.” He wrote that the plan would include rebates for low-income people. His statement did not address the ministers’ point that tax expansion estimates were not included in the administration’s calculations.

The Rev. Lee T. Wesley, pastor of Community Bible Baptist Church in Baton Rouge, said the majority of low- and middle-income people in Louisiana are working folks who make more than $20,000 annually and, therefore, would not qualify for the proposed Family Assistance Rebate Program, called FARP. Higher sales taxes and sales taxes on more goods and services would mean more costs for people who already have to watch their dimes and nickels closely, he said.

Those were not the only administration figures that came into question last week.

The Public Affairs Research Council of Louisiana also questioned some of the administration’s numbers.

For instance, the plan reflects personal income tax numbers from a couple years ago when the economy was coming out of recession but still reflected lower revenue figures, said PAR President Robert Travis Scott. At the same time, the plan used more recent sales tax collections that showed a more-robust economy, Scott said.

This means the administration used a smaller number than would be presently expected for the amount of revenues to be removed from abolishing income taxes and a larger number from the sales taxes that would be generated.

PAR is a Baton Rouge membership group whose board includes executives of large businesses and law firms in Louisiana. The group researches public policy issues and Scott is a registered lobbyist.

Barfield, in another prepared statement, rebutted PAR’s assumptions. “A standard approach to estimate the future is to begin with the best data as of today. This we have done, but only as the starting point,” Barfield stated.

Scott Drenkard is a Tax Foundation economist who advocates around the country for states to replace taxes on income with taxes on consumption. He advised Jindal administration officials on how to restructure Louisiana’s tax system. He claims that such as a system spurs growth in the economy with incentives to save and create capital.

During a visit to Baton Rouge last week, Drenkard said in an interview that Louisiana should focus on the future rather than on the impact today. “A tax system that’s growing the economy is better for everybody than how it initially changes the tax burdens,” he said.

Mark Ballard is editor of The Advocate’s Capitol news bureau. His email address is mballard@theadvo
cate.com.