Whether you believe Louisiana’s sales tax should be raised, one of the lessons of today’s tax debate is that some things are taxed and some things are not. A lot of somethings.
That’s an important lesson: If nothing else, Gov. Bobby Jindal’s campaign for a higher sales tax has pointed out the glaring inconsistencies in what is currently taxable and what is not.
Jindal aide Tim Barfield told legislators recently that part of Jindal’s tax plan is to broaden the base of the sales tax — in other words, tax some services that are currently not charged the sales tax.
That is no small amount of change. The ending of many current exemptions from sales tax, all at a 6.25 percent rate instead of the current 4 percent, would raise an estimated $1.4 billion a year.
The list of exemptions that would disappear is long. While there’s much attention on the lost exemptions for Habitat for Humanity — the charity would have to pay taxes on lumber and nails — the big bucks come in services, but also in some industry sectors. Fuses, belts and other equipment for paper mills and loggers would be taxable under the new law.
At the same time, there would be sales tax collected on office services such as tax preparation that are today exempt. And there would be sales taxes on cab rides, veterinary services, movie ticket sales — it’s a long list.
We have opposed the Jindal tax plan, generally not favoring sales taxes. However, we applaud the list, because of its illustration of how wacky the tax code gets.
Why is a movie ticket not taxable? Why is a haircut not taxable? Why does Texas tax fortune-tellers, but Louisiana does not, when there are so many in and around the French Quarter?
Why should lawyers’ services not be taxed under the Jindal plan, and accountants’ clients pay? Barfield suggested that the administration has been engaged in deep Solomonic decisions.
The rationale: Lawyers are needed in circumstances like family court or adoptions that are not strictly speaking commercial.
Thus, no tax. Almost like fortune-telling, this process.
We don’t like most of what’s in the Jindal plan. However, the governor has used the plan to draw attention to “special interest loopholes” in the tax code.
This debate has made many people aware, perhaps for the first time, that not only does Louisiana fail to tax services taxed in other states, but that the notion of taxing “sales” is less and less relevant to everyday commerce.
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