Jindal administration says tax overhaul would shift tax burden

The governor’s tax plan would transfer a $500 million tax burden from individuals to businesses, the Jindal administration told legislators Tuesday.

“For families ... there will be a significant benefit,” Tim Barfield, executive counsel for the state Department of Revenue, told members of the Louisiana House Committee on Ways and Means. Barfield is the governor’s point man on the tax overhaul bid.

The governor wants to rewrite the state’s tax code by eliminating the state’s personal income and corporate taxes. The state sales tax would increase from 4 percent to 5.88 percent. A new host of services, including hair cuts, veterinary bills and other expenses, would be taxed.

Working from handouts distributed by the Jindal administration in the absence of complete legislation, committee members are looking at the proposal ahead of the April 8 start of the legislative session.

The Department of Revenue released tweaked data predicting all individual income ranges would see a benefit from the governor’s tax plan.

The new revenue analysis still projects benefits for all household ranges, but it changed the underlying assumptions of what was currently taxed, a move that appears to shrink the costs of the increased sales tax. No explanation was given for the change at the hearing. Later in the day, the Jindal administration released a statement that attributed the changes to data fluctuations caused by the use of preliminary figures.

Among the new information that emerged Tuesday were more details on the rebate programs that would be offered to offset the increased sales tax expenses.

Two forms of assistance would be offered:

Nearly 650,000 families would qualify to divide $110 million a year in assistance through a program administered by the state Department of Children and Family Services, which already oversees food stamps and welfare benefits. The program would target households with a maximum of $35,000 in annual earnings. The rebates would range from $25 to $300 a year, depending on household size, income and filing status.

Retirees, active duty military and others would qualify for a separate rebate ranging from $100 to $420 a year for federal adjusted gross incomes of $60,000 or less.

Several legislators pressed Barfield to explain who would fare worst under the proposed changes since the governor wants to avoid any impact on the state operating budget that funds colleges, hospitals and other public services. State income taxes generate roughly $3 billion a year in revenue for state government.

“Somebody’s got to pay the price tag,” state Rep. Mike Danahay, D-Sulphur, said.

Barfield told the committee that families would benefit even with the increases in sales tax and sales tax base.

He said 40 percent of state sales taxes currently are borne by businesses. With the broadening of the tax base, businesses would continue to shoulder part of the burden, he said.

The Jindal administration already announced that businesses would have to pay taxes on accounting, office administrative and other services. Those services are not currently subject to a state sales tax.

Danahay said the increased tax burden for businesses likely would fall on consumers.

“It’s going to be a higher price because you pass that burden on,” he said.

Barfield said that could be the case but he said the net benefit of the changes would be good for the economy.

Committee Chairman Joel Robideaux, R-Lafayette, interjected that consumers would have more money to spend because of the elimination of state income tax.

“Businesses will realize some bump in revenue based on consumers’ spending,” said Robideaux, arguing that businesses might not need to raise prices.

Outside the committee room, the Jindal administration promoted a study by two think tanks — the Pelican Institute for Public Policy and the Beacon Hill Institute — that concluded the governor’s proposal would create 11,810 additional jobs within four years and generate an average of $910 in extra cash for the state’s households.

Other groups are critical of the governor’s proposal.

After the committee meeting, Barfield met with religious leaders representing 250 ministers across the state who are concerned that the plan will negatively impact low and middle income households. The pastors said Friday the previous data released by the department didn’t appear to include the new sales taxes on services, such as cable TV and Internet services, zoo visits, and veterinary treatments for pets.

Barfield said Tuesday that the proposed sales tax expansion was included in the previous report.

The Public Affairs Research Council, a membership group that researches public policy issues, recently complained that the governor’s plan is based on personal income tax numbers from a couple years ago when the economy was coming out of recession and the receipts were lower, but uses sales tax collections that reflect a more robust economy.

Robideaux told committee members Tuesday that the 2011 numbers are being updated to ensure an accurate analysis of the proposal’s financial impact.

Late Tuesday, the Louisiana Legislative Black Caucus in a news release said it planned to propose individual tax rates and eliminate the corporate franchise tax. The group of eight senators and 14 representatives said it also wants to study the idea of a uniform tax collection system and keep tax breaks intact.

The Associated Press
contributed to this report.