Gov. Bobby Jindal’s plan to eliminate personal income taxes could result in a tax increase for more than 100,000 retired state employees and teachers if the revenue hole is — as suggested — partially offset with a sales tax increase, according to the leaders of two retiree groups.
Others who retired from public service also would be affected, the officials say, because individuals who draw public pensions do not pay personal income tax on those benefits.
Frank Jobert, executive director of the Louisiana Retired State Employees Association, said much of the discussion recently was how to eliminate income taxes while remaining revenue neutral.
“If the plan goes through, sales tax would be increased to offset the elimination of income taxes. It would really be a tax increase for retirees ,” Jobert said. “It would be a problem for us.”
Graig Luscombe, executive director of the Louisiana Retired Teachers Association, said eliminating income tax while raising sales taxes is “no trade-off” for retired teachers.
“They don’t pay personal income tax now, but they will end up paying a higher sales tax,” Luscombe said. “It’s certainly going to impact their disposable income.”
Louisiana State Employees Retirement System reports 42,722 retirees draw benefits. The average annual retirement benefit is $22,236 for the rank and file, according to LASERS records.
The Teachers Retirement System of Louisiana has 67,657 retirees and beneficiaries. Those retirees have an average annual pension benefit of $24,300.
Neither group of retirees has had a cost of living adjustment in several years. Many of those who have been retired a long time and made very little during their work years get annual pension checks at or near the poverty level.
Jindal did not respond to two email requests for comment submitted Wednesday through his press office and communications director Kyle Plotkin.
Tim Barfield, Jindal’s revenue department executive counsel, issued a statement Wednesday that did not address the specific question about the impact on the retirees. “We do not have a final plan and the governor and I are still meeting with legislators and stakeholders. Tax reform is about fostering an environment where more businesses want to invest and create jobs and opportunities for our people,” Barfield said.
Jindal announced via a news release earlier this month that he would seek to eliminate state personal and corporate income tax as part of a tax overhaul he would submit to the 2013 Legislature which opens April 8.
Specifics of the plan have not yet been laid out. Barfield said something will be proposed to offset any tax increase for low and lower middle classes.
Barfield has said previously that a sales tax increase is possible to make up for lost revenues. Other considerations, he has said, include “broadening” the sales tax base, eliminating some sales tax exemptions and increasing so-called “sin” taxes such as those on cigarettes.
Some lawmakers have already expressed concern that a sales tax increase would negative affect the poor, especially those living in high sales tax areas already.
A key lawmaker in the tax debate — state Rep. Joel Robideaux, R-Lafayette, who as chairman of the House Ways and Means Committee would sponsor the legislation for the governor’s proposals — said rebates, grant packages and pre-loaded debit cards could be used to relieve the tax burden.
Jobert, of the Louisiana Retired State Employees Association, said he will monitor the tax plan development closely, looking for any kind of exemption or rebate to help retirees, which he said would be difficult to craft.
“Some people have been talking about it being necessary to eliminate the exemption on food and drugs for the proposal to be revenue neutral,” said Luscombe, of the Louisiana Retired Teachers Association. He said that would particularly be painful on retirees by increasing costs for the necessities of life.
Luscombe said Jindal talks about the tax plan making Louisiana look more like Florida and Texas, each of which do not have personal income tax. “They have property tax, not sales tax,” he said.
Luscombe said the retired teachers group is having meetings around the state to help its members become advocates on issues affecting them, including how to use the legislative website and how to send legislators emails.