Gov. Bobby Jindal has proposed a “tax swap” of income taxes for a 2 percent increase in the sales tax. For me, this was initially a repugnant concept because I remember well the Stelly “tax swap,” which was anything but a zero-sum swap.
Assuming the governor intends a real zero-sum swap and after some thought, I find this an intriguing idea. It is not clear if Gov. Jindal includes corporate income tax, but I presume it will, and this leads me to my first arguing point:
With businesses absolved of state income taxes, Louisiana establishes a major incentive for businesses to locate in our state, giving Louisiana significant new sources of jobs. This will grow population and sales tax revenue.
Increased use of sales tax will broaden Louisiana’s tax base, reducing the burden on middle-income folks who are able to save a bit — but not enough. By shifting to sales tax, Louisiana affords a bit of relief to those marginal savers and increases incentives to save.
The population lost tends to be those who paid state income taxes, while those who remained aren’t required to pay income taxes. This provides even more incentives to consider Jindal’s proposal.
Many of our neighboring states have no income tax. Our residents, in increasing numbers, retire and move to other states with no income tax. Jindal must stop this loss or Louisiana will lose yet another U.S. representative in Congress with the next census, and suffer the concomitant loss of political influence. Let’s act to grow our population and not just impede our decline.
I believe Gov. Jindal is concerned about future inflation. A broad-based sales tax is more able to “track” with inflation than a narrow-based income tax. Selling tax increase on tax increase in a period of higher inflation will be a fool’s errand, and Jindal is no fool.
Still, the devil will be in the details, and until Jindal puts details in his proposal, few will commit to it. We can, of course, be receptive and wait and see.
John R. Myrick Jr.