Gov. Bobby Jindal said Thursday that he wants to eliminate the state’s personal income and corporate taxes.
However, there will be a tradeoff. Consumers are likely to pay more at the cash register, if the proposal succeeds. Smokers also might pay more for their habit.
Jindal declined an interview request to discuss the proposal, which he is floating ahead of the start of the April 8 legislative session.
“Eliminating personal income taxes will put more money back into the pockets of Louisiana families and will change a complex tax code into a more simple system that will make Louisiana more attractive to companies who want to invest here and create jobs,” Jindal said in a prepared statement without providing further details.
The governor’s announcement sparked concerns about how the lost revenue would be offset, with an increase in the state’s 4 percent sales tax pegged as the likely generator. Proponents of the eliminations said the move could put Louisiana on the same economic development playing field as Texas and Florida, which do not have state income taxes.
“The devil is in the details,” state Senate President John Alario said Thursday. Alario, R-Westwego, said Jindal administration officials discussed a 1.6 percent increase in state sales tax during a meeting with legislative leaders this week.
Tim Barfield, the state revenue department’s executive counsel, confirmed during a late Thursday conference call with reporters that a sales tax increase is on the table. Other considerations, he said, include “broadening” the sales tax base, eliminating some sales tax exemptions and increasing so-called “sin” taxes such as the tax on cigarettes.
“There’s a tradeoff,” said Barfield, adding that the size of the sales tax increase will be determined in discussions with legislators.
Louisiana currently exempts groceries, medicine, household utilities and gasoline from state sales tax. Barfield said none of those exemptions would disappear.
In the state budget year that ended June 30, the state collected $2.5 billion in personal income and $374 million in corporate franchise and income taxes. Sales tax collections stood at $2.6 billion. The money helps pay for hospitals, colleges and other public services.
The governor said income taxes will be eliminated in a “revenue neutral manner.”
State Rep. Joel Robideaux, R-Lafayette and chairman of the House Committee on Ways and Means that would first hear any legislation, said there are only so many options for replacing nearly $3 billion in income tax collections.
The options include increasing property taxes, which he said the governor opposes, raising sales taxes, getting rid of tax breaks and implementing sin taxes, he said.
State Sen. Neil Riser, R-Columbia and chairman of the Senate Committee on Revenue and Fiscal Affairs, said he wants to see how high the state sales tax would have to go in order to make the proposal work.
“That’s always been the issue in Louisiana of how you would pay for it,” he said.
State Rep. Patricia Smith, D-Baton Rouge, said she is concerned that a sales tax increase would negatively affect the poor, especially those living in areas with higher local sales taxes. “That’s a hardship on people, in my opinion,” she said.
Robideaux, who is an accountant, said the Jindal administration shares Smith’s concern.
He said he thought about it and came up with a couple of ideas, including rebates, grant packages and pre-loaded debit cards.
Jan Moller with the Louisiana Budget Project said he fears a financial blow to the state’s most vulnerable citizens.
“At a bare minimum, a tax overhaul should not be an excuse to make the state’s poorest citizens pay more, and they would suffer the most from the governor’s proposal to raise sales taxes,” Moller said in a prepared statement.
Barfield said something will be proposed to offset any increase for low- and lower-middle-classes.
“They would be in no worse position than they are today,” Barfield said.
Barfield said the administration wants to encourage job creation and economic growth, which help elevate the poor.