Private memo outlines governor’s tax overhaul plans
In a handout given to legislators during briefings, Gov. Bobby Jindal calls for raising the state sales tax nearly 2 cents per dollar, increasing the state cigarette tax by more than $1 per pack and eliminating severance tax exemptions.
Legislators were allowed to peruse a two-page outline titled “A Framework for Comprehensive Tax Reform,” while the governor explained his plan for eliminating the state personal income and corporate taxes.
Jindal administration officials collected the outline at the end of the meeting, but one legislator first took a photograph of it. Seven legislators described the memo and the meetings the same way.
The governor is meeting with legislators ahead of the legislative session that begins in April. He has released few details to the general public on how he plans to make his tax elimination plan revenue neutral.
State Rep. Joel Robideaux, who as chairman of the House Ways and Means committee likely will sponsor the legislation once it’s filed, said the memo contained just ideas to start the discussions and not a concrete plan. “There is nothing etched in stone at this point,” Robideaux, R-Lafayette, said.
Tim Barfield, Jindal’s point man on the tax overhaul, agreed. “This is going to be a very collaborative process and the models will be in flux and discussed before and throughout the session with legislators and stakeholders. Right now, nothing is final other than our goal of eliminating the personal and corporate income tax in a revenue neutral manner,” he said in a prepared statement.
State Rep. Eddie Lambert, R-Prairieville, a member of the Ways and Means Committee, said that at the meeting he attended at the Governor’s Mansion, Jindal and Barfield outlined the plan, which was on the handout, that included increases in sales taxes, cigarette taxes and removal of many tax exemptions.
“It was a very broad discussion to outline what their thinking is and to get feedback,” Lambert said. “My focus was how we are going to replace $3.2 billion in income taxes.”
State Rep. Sam Jones, D-Franklin, said he and about a dozen other legislators gathered in the Mansion’s dining room. Cookies were served.
Jindal and Barfield said they wanted to handle the taxes in one bill and deal with tax administration in another, Jones recalled. “They said they were going to file the bills a little bit after the session began. And they said they wouldn’t ram it through like the education bills” from last session, Jones said.
Once the meeting was over, Jindal asked the legislators to return the handout, Jones said.
State Sen. Rick Gallot, D-Ruston, said that after his meeting at the Mansion, a member of the governor’s staff then came around to collect the memo from each participant before they left the room.
The front-page of the memo describes two bills.
One measure would increase sales taxes and eliminate exemptions as a way to pay for revenues lost from repealing personal income taxes and corporate income and franchise taxes.
The second bill described would create a Louisiana State and Local Sales Tax Commission that would “act as a single collector, auditor and interpreter of the law...”
Bill 1, according to the handout, would retain state sales tax exemptions on groceries, utilities, prescription drugs and fuel. State and local governments still would be able to make tax-free purchases. The governor apparently also wants to keep several business exemptions, including those involving natural gas, vessels and telephone companies. It would allow for a “Modified Earn Income Tax Credit” to offset the impact of increased sales taxes on low-income families.
The changes would be paid for, according to the memo, by increasing state sales taxes from 4 cents per dollar to 5.78 cents per dollar.
Robideaux said the state sales tax increase is manageable if the amount of items on which sales taxes are charged is expanded. He said the line would have to be held on the exemptions and few could be allowed back.
Some of those exemptions involve severance taxes, which are the taxes paid on oil and gas extracted from Louisiana.
“My blood pressure just went up,” said Don Briggs, president of the Louisiana Oil and Gas Association, adding that the industry his trade association lobbies for in Baton Rouge has 23 such exemptions.
Briggs said eliminating the corporate income and franchise taxes is only helpful depending on the legal organization of a company. But having to pay severance taxes currently exempted would negatively impact drilling and prospecting activities across the state.
Briggs said he was always concerned how the state budget would stay revenue neutral once $3.2 billion from income taxes was removed. “He’s going to be doing it on the back of certain industries and evidently he’s going to be doing it on the back of us,” Briggs said, adding that collecting the memos after meeting with legislators gave the plan more seriousness than just a chat about options.
The memo also outlined plans to increase the cigarette excise tax rate from 36-cents per pack to the $1.41 per pack that Texas charges.
Jones recalled Jindal telling his group that he was willing to reverse himself on the issue — the governor had opposed increases and renewals of taxes on tobacco products — to show how important he thought the tax overhaul issue was. “The governor said, ‘Look, I’m giving this up,’ ” Jones recalled.
Robideaux said they have calculated that an increase that large might lead to a 40 percent reduction in smoking.
Andrew Muhl, a lobbyist for the American Cancer Society, said his organization’s statistics show that for every 10 percent increase in the price of a pack of cigarettes, youth smoking rates drop by 6.5 percent and overall cigarette consumption declines by 4 percent.
“We’re encouraged to hear of the governor’s plan to raise the cigarette tax to the current rate in Texas,” Muhl said. “It’s one of the most effective ways to reduce smoking and other tobacco use, especially among kids.”