Gov. Bobby Jindal unleashed a rumor mill when word got out that he plans to eliminate the state’s personal income and corporate taxes.
The Jindal administration released few details, but made clear that the proposal likely would be a tax swap. Louisiana will not fatten taxpayers’ bank accounts and close down colleges to absorb the loss in revenue. Nearly $3 billion would have to be replaced if income taxes are abolished, at least partially by putting a bigger emphasis on taxing consumption.
Overnight, speculation sprang up about local governments losing control over their tax collections, smokers paying more for their habit and state sales taxes doubling.
The Jindal administration said it does not want to step on local governments’ toes. But smokers may pay more per pack of cigarettes, the administration conceded.
Other things are off the table.
The state already exempts $718 million in revenue by not collecting state sales tax on household groceries, residential utilities and prescriptions. The administration said those exemptions will stay in place.
Exactly what will happen with other exemptions is unclear.
For example, farmers and livestock producers get a state sales tax exclusion on feed, seed and fertilizer used for crops and livestock.
Determining how much the state would have collected on those feed, seed and fertilizer sales is impossible to derive because of the way the state reports the information. The state’s tax exemption budget spells out just how much the state loses every year on many of the exemptions the governor wants to keep. Other exemptions are lumped into a category called “other exemptions” that totals more than $800 million, making it hard to tell what the big players are.
However, the state exempts sales tax on transactions that occur almost daily in Louisiana.
There is no state sales tax on a daily newspaper, theater tickets or cable television installation. Going to a laundromat might be more expensive were it not for a sales tax exemption on the dollar bills fed into the washers and dryers. School supplies would be pricier if the annual sales tax holiday held in August were canceled.
Jindal has not talked to State Capitol reporters about his tax proposal, which legislators will start debating in April when they gather for their regular session.
However, he granted an interview to the national television show “FOX and Friends.”
“Part of how you make up that revenue is you give up these loopholes, these credits, these giveaways and then you say why are we taking money from peoples’ pockets, sending it to Baton Rouge and then giving it back to special interest groups and people who have lobbyists,” the governor said.
Jindal said sales tax might have to be raised “a little bit.” He went on to say that a consumption tax philosophically is better than an income tax, before moving on to the 2016 presidential race.
The state can look next door to Texas, which broadened its sales tax base to focus on services.
Debt collection, Ancestry.com subscriptions, insurance appraisals, dog grooming, massages, carpet cleaning, home alarm installation and locksmith services are taxable in Texas. Also considered taxable in Texas: pest control, lawn maintenance and a visit to a fortune teller.
“If you operate a service business in Texas, you may be required to collect sales tax,” Susan Combs, Texas’ chief tax collector, explained in a guide to taxable services.
Michelle Millhollon covers the governor’s office and state government finances for The Advocate’s Capitol news bureau. Her email address is firstname.lastname@example.org.