State tax system being eyed
In much the same way the public school education overhaul dominated the 2012 session of the Louisiana Legislature, top Jindal administration officials say the thrust of the 2013 session will be to revamp the state’s tax system.
Tim Barfield, who officially rejoined the administration in the Department of Revenue on Oct. 1, says he is focusing primarily on developing tax overhaul ideas by the end of the year. By January or so, he will starting circulating for a couple months, first various detailed proposals, then drafts for possible bills, culminating in legislation for lawmakers to consider in the session that begins April 8, he said.
The revamp basically will involve “flattening” Louisiana’s tax structure, which translates to lower tax rates, fewer tax brackets and few exemptions, said Barfield, executive counsel at the Louisiana Department of Revenue.
As Barfield explains, it’s the sticker price – not what the consumer actually pays – that is hurting Louisiana’s efforts to attract businesses.
Stephen Moret, who is secretary at the state Department of Economic Development and is working with Barfield, pointed out that surveys show the total amount of taxes actually paid – income, property, sales, etc. – makes Louisiana one of the nation’s least taxed states for many wage earners and businesses.
But a focus on published tax rates and the complexities of the system — for instance, three income tax brackets for individuals and five income tax brackets for corporations — neglect the overall picture, which also includes exemptions that dramatically reduce the amount of taxes owed, he said.
“Very often Louisiana is perceived as a high tax state because we have relatively high marginal tax rates. But in fact for most businesses, for instance, if they actually calculate the effect of all the different exemptions, our tax burden, the actual taxes businesses actually pay, are quite low,” Moret argued.
Lowering tax rates doesn’t seem wise in a state that hasn’t raised enough revenue in recent years to train a trooper, keep all its prisons open or fully staff its public hospitals.
State Sen. Dale Erdey, who is vice chairman of the Revenue and Fiscal Affairs committee, says replacing the revenue lost from “flattening” likely will require the elimination of many tax exemptions, some of which are very popular. Legislators are analyzing the tax breaks to determine which are productive, the Livingston Republican said.
In the 2011 fiscal year, the value of the 468 available was about $6.8 billion, according to a report released earlier this month by Moret and Barfield.
Where the rubber will hit the road, says state Rep. Joel Robideaux, is deciding whose tax breaks to eliminate. Cutting your exemption is probably OK, but getting rid of mine surely will cause a rip in the space-time continuum. “Right there, that’s the problem,” said the Lafayette Republican.
The only way to win support for overhauling the tax structure is to convince individuals and businesses, many of whom will be sacrificing a known advantage, that they should trade their exemptions for the promise of tax simplicity, he said. There needs to be a “buy in from a lot of different interests,” he said.
Robideaux, who as chair for the tax-writing House Ways and Means committee is the likely sponsor of the proposal, said he told Barfield that he wants no part in a repeat of the education overhaul effort.
The strategy to pass the education overhaul included Jindal and his aides filing the legislation at the last minute, pounding it through the Legislature with few changes in a few weeks, bullying supporters, calling opponents names, and leaving a lot of people angry, some of whom are challenging the new laws in court, said state Rep. John Bel Edwards, who chairs the Democratic Caucus in the Louisiana House.
As a strategy, Edwards says he doesn’t blame the Jindal administration for taking advantage of legislative weakness to win passage of the education revamp bills. A lot of legislators signed on to the concept before seeing the details, he said. But Jindal’s drive to win alienated a lot people who could have contributed to a better and more widely accepted public schools reform, Edwards said.
Barfield said he talked with people involved with pushing the education agenda as well as critics of that process.
“I hope to do better than that,” he said.
Mark Ballard is editor of The Advocate Capitol news bureau. His email address is firstname.lastname@example.org.