CABL reviews tax options

A Baton Rouge-based public policy group said Friday that the state can replace nearly $3 billion in tax revenue by eliminating sales tax exemptions and broadening the base.

The Council for A Better Louisiana tackled the issue of how Gov. Bobby Jindal might swap the state’s personal income and corporate taxes for a sales tax hike.

The governor’s proposal, which lacks key details, will be debated in the legislative session that starts April 8.

The organization said replacing the revenue solely with a state sales tax increase would require a hike of roughly 4.5 cents on the dollar. “Needless to say, that would no doubt be seen as far too high of a rate, a detriment to business and too great of a burden on many individuals,” CABL said.

The governor wants to keep intact sales tax exemptions on household food, prescriptions and gasoline.

Barry Erwin, president of CABL, said Jindal could rack up revenue by trying to erase sales tax exemptions on “purchases by offtrack wagering facilities and racetracks, various types of installation charges, room rentals at camps and retreats, purchase of airplanes and equipment by Louisiana-based airlines, sales through coin-operated vending machines, sales of cellular phones and electronic accessories, food and admission to various types of cultural events, admissions to museums, and, of course, the famous Mardi Gras beads.”

He said there are a number of small exemptions that could add up to more than $800 million in revenue.

CABL said the Jindal administration also could broaden the sales tax base to tax services such as lawn service and home repairs.

The organization noted that the question is being raised of “whether taxpayers and economies are better served with a greater reliance on taxes on income or taxes on consumption.”

Erwin said that is the zillion dollar question.

“We don’t know enough about the plan at this time. And when we do we need to have really solid data and good projections that will tell us realistically what to expect,” Erwin said.

Meanwhile, state Rep. James Armes, D-Leesville, expressed concerns that the governor’s plan will not be fair.

“The administration wants a sales tax increase which may sound good to some, but I believe it’s an excuse to make the middle class and our poorest citizens pay more,” Armes said in a news release.

Comments

1) Comment by RODEO CLOWN - 02/02/2013

JEFFSADOW: You are correct concerning the number of income tax exemptions, ie, as of 2011, corporations were granted 55 income tax exemptions as opposed to individuals were granted 76. However, it is not the numerical number of exemptions granted within any specific category that is of importance but the magnitude of revenue the state losses from such exemptions. It is of equal importance to note, that corporations are considered legal entities, as such, can/do benefit from both corporate tax exemptions as well as those tax exemptions granted for individuals. Individuals can not/do not benefit from exemptions granted corporations and businesses. Another tax exemption corporations/businesses benefit from is exemption from paying sales taxes. Any company can apply for a state sales tax exemption which, if granted, exempts the company from sales taxes on both the state and local level. This has ominous overtones for Jindal's current effort to replace the current income tax system with higher sales taxes. The bulk of companies in Louisiana don't pay sales taxes what so ever. I'm quiet sure Jindal will not/never allow such exemptions to be abolished. Therefore, the bulk of any sales taxes increase required to replace the billions of dollars collected by state income taxes will fall squarely on the shoulders of the lower and middle income citizens of Louisiana. Corporations and businesses will get off literally scott free, paying no state income taxes or sales taxes. A more than obvious plan from Jindal to reward his major supporters.

2) Comment by RODEO CLOWN - 02/02/2013

JEFFSHADOW: Jindal's administration has been/is a picture perfect example of fiscal irresponsiblity. Under Jindal's leadership, 2008-11, total state revenue has DECREASED in excess of 2 billion dollars. Jindal's approach to revenue generation can be described as a total failure and can be best appraised as throwing the baby out with the bathwater. The following presents just two sectors where state revenue has scarificed by Jindal's misguided "Grover Norquist" approach to fiscal reform. CORPORATE FRANCHISE&INCOME TAX: An examination of the 2011 LDR REPORT(pg 11) reveals corporate franchise&income tax collections of $264 million for 2011 represents a decrease in excess of $731 million dollars from 2008 collections of $995 million, ie, a percentage decrease of almost 75%. One has to question why? The answer is found in Jindal's overly generous tax exemptions handed out like candy during his first term to existing corporations in Louisiana and as "incentive" to attract new business operations. Granted, the goal of business maintaince and expansion is laudeable, however, the program was poorly planned, poorly evaluated and even less than poorly regulated. This is evidenced by the massive decrease in such revenue collections. SEVERANCE TAX COLLECTIONS: NATURAL GAS: Severance collections from natural gas production decreased by over $193 million dollars from a 2008 level of $317 million to a 2011 level of $124 million. Revenue has decreased inspite of the fact that natural gas production in Louisiana has increased from 1.289 billion MCF in 2008 to over 2.900 billion MCF in 2011, a 224% increase in production. However, approximately 70%, 1.997 billion MCF, of natural gas produced in Louisiana(1.987 billion MCF) is granted an exemption from severance tax under a 1994 exemption given to gas produced from horizontally drilled wells. Jindal fought any attempt in 2011 to modify or repeal this exemption. The net result from a revenue standpoint was a loss of almost $300 million dollars in severance revenue. It's called a severance tax for one simple reason. Once the resource is "severed" from the state it can not be replaced. Even though severance tax rates have decreased 14 cents per MCF since 2008, increased production of 224% would more than offset such a loss in revenue, maintained the revenue level and resulted in total severance tax revenue(gas) of $436 million dollars. The moral of this presentation is such: we do not have to reinvent the fiscal wheel in order to save Louisiana. Louisiana has had and has the revenue available to forgo any and all of the cuts forced down Louisiana's throat. The revenue has always been there to maintain state services, prevent tuition increases, provide for the sick and dying, charitable organizations and even provide state employees modest raises without having to make one increase in Louisiana's taxes. The state simply needs a chief executive with the forsight, fortitude and backbone to administer the state in a level headed manner and not administer from the position that the wheel needs to be reinvented and that it is his way or the highway.

3) Comment by markedwardmarchiafava - 02/02/2013

I've got a much better idea. Determine the true cost of state government, divide it equally amongst all citizens over the age of 18 and then sit back. The next Amerikan revolution wouldn't be long in coming.

4) Comment by jeffsadow - 02/02/2013

@rodeoclown, apparently your cursory review of the TEB (admittedly, over 400 pages) was too cursory. Did you catch that the combination of individual tax breaks exceeded those of corporations (income ones are a little higher for corporation, but sales tax ones swing it in favor individuals -- and that a couple if hundred million also gets exempted on behalf of government). So please explain to us how their constitutes a giveaway "under the guise of business development" Corporations do get breaks under these, but the main beneficiaries in aggregate are individuals. And Rep. Armes is wrong; see http://jeffsadow.blogspot.com/2013/01/jindal-tax-swap-succeeds-in-fairness.html.

5) Comment by RODEO CLOWN - 02/02/2013

An excellent reference published by the LA DEPT OF REVENUE entitled TAX EXEMPTION BUDGET 2010-11 provides insight into the tax exemptions granted by Louisiana. It makes for some very interesting, detailed reading. The report is an excellent source document providing detailed information concerning what respective exemptions are in effect, what the exemption cost the state in “lost” revenue and what the state's revenue would be if the exemption were repealed or suspended. Just a cursory review of this document reveals the fiscal fact that Louisiana has had/does have more than enough revenue to cover any/all of the cuts inflicted on the state by Jindal in the past four/five years. The revenue is there, Jindal has simply given it away under the guise of business development. Had Jindal concentrated as much time and effort on revenue development and maintenance as he has on cutting the throats of the states citizens, Louisiana would not be facing the current financial crises-end of story.

6) Comment by swinham - 02/02/2013

CABL deserves applause for at least presenting a plan that would work - something the Jindal administration has not done. There is no plan. My guess is Jindal will continue to keep himself in a win/win position - national attention for his plan to eliminate income taxes while letting others (ultimately, the legislature) carry the water to make up the difference. That way, he gets the praise and the legislature gets the criticism for whatever they can cobble together on the other side of the equation.

7) Comment by markedwardmarchiafava - 02/02/2013

Yes, by all means, let's figure out ways to collect MORE "dollars" from the citizens. After all, the state NEEDS that extra income. Need proof? Simply read the very next news article after this one.

8) Comment by LawyerDan65 - 02/02/2013

If you eliminate the State income tax AND have the local tax collectors, who are already collecting local sales taxes, collect the State tax as well,will let the State eliminate most of the State Dept of Rev. savings that money as well. Add the elimination of the sales tax exemptions and exclusions would then probably get almost all of the $3B.....hmmmmm its a thought

9) Comment by Bighug - 02/02/2013

Rep. Armes got it right. King Jindal wants to reward the rich who contribute to him at the expense of the poor and middle-class.