The future of Gov. Bobby Jindal’s tax plan is still being written. Details are still in the works and no one can say with any certainty what, if anything, will become law.
The tax plan is a moving target, several legislators noted recently, as the governor’s aides seek to reconcile the numbers so that the state doesn’t lose money in a huge switch from income taxes, corporate and personal, to much higher sales taxes.
However, you don’t have to know the exact sales tax rate — whether 5.88 percent in the original Jindal plan or 6.25 percent as amended last week — to know that there is a big loser in the plan that may not be obvious.
It is local government, which is also dependent on sales taxes. Unlike those passed by legislators in the State Capitol, local sales taxes have to be voted on by the people.
Will the public be willing to add, or even renew, a local sales tax if Jindal’s plan passes?
“I think we’re going to cripple local government if we pass this thing,” said Rep. Johnny Berthelot, R-Gonzales, at a public forum this week.
Under Jindal’s proposal, the state’s personal income and corporate taxes would disappear in favor of an increased state sales tax and a broadening of the base. The state sales tax would increase from 4 percent to 6.25 percent.
In addition, many currently untaxed services would be taxed, including a wide range of services that businesses purchase from other businesses. While that’s where the big money is, because losing the income tax is such a huge revenue loss, it is the political aftershock to local government that concerns legislators like Berthelot.
One of the ways that Jindal has been intentionally misleading the public on this is understating the impact of a large increase in sales taxes.
Consider this statement: “With the increased rate, Louisiana’s state sales tax rate will be the 24th lowest in the nation and one of the lowest in the region.”
The governor does not say that the combined state and local sales taxes in many Louisiana parishes would be the highest in the nation. A few states have considered, but not adopted, a shift of the magnitude of Louisiana’s.
A few other states have higher state sales taxes. The tricky word is “state.” Mississippi’s is a tad higher than Louisiana’s proposed state rate, the governor notes. Texas’ would be the same, 6.25 percent, if Jindal does not raise the target again.
Not only does that omit the local sales taxes in Louisiana, but it excludes the much-higher property taxes charged in other states to pay for what in Louisiana are state-funded services.
Local government appears to be given one option in future: Pay for local services with property tax increases. There’s nothing inherently wrong with that idea, but Jindal tries to have it both ways by saying he’s against property tax increases.
His plan, if adopted in anything like its current form, essentially mandates future property tax proposals from local government, because the combined state and local sales taxes will be too high to be politically salable. The Louisiana Constitution also forbids levying of income taxes by local government.
So there are by-products of such a high state sales tax that Jindal proposes.
The governor exploits the confusing differences in state tax systems to make his proposal appear a good deal. It’s not.