Tim Barfield, executive counsel for the state Department of the Revenue, told business leaders in Baton Rouge on Wednesday that the state’s complicated tax structure puts a chokehold on economic development.
Barfield gave no specifics about what changes are under consideration by the Jindal administration, saying those details will come in January and February. Instead, he told the Rotary Club of Baton Rouge what is wrong with the current tax structure.
“Tax reform is just another foundational block ... to make Louisiana, for the long term, a more attractive place,” Barfield said.
Changes to the state’s tax structure are expected to be the primary focus of the regular legislative session that starts April 8.
On Louisiana’s books are 468 tax incentives that reduce state government revenue by $6.8 billion a year. Income is sorted into brackets for taxation. Corporate income goes into one of five brackets. Individual income goes into one of three brackets.
The state faces a nearly $1 billion operating budget shortfall in the fiscal year that starts July 1.
However, Barfield said Wednesday that the purpose of the coming changes will be to make it easier to navigate the state’s tax system, not to generate more revenue for hospitals, colleges and other public services by increasing taxpayers’ bills.
He said the only way to get rid of tax exemptions is to simplify things without creating big winners or losers.
Barfield and state Economic Development Secretary Stephen Moret are shouldering most of the responsibility for developing Gov. Bobby Jindal’s tax package. The first step is to point out problems for business leaders while crafting the package behind closed doors.
Rotary Club members scooted their chairs around to face a giant screen displaying slides that tied into Barfield’s presentation. They tucked into a lunch of fried chicken and fruit salad while he talked about tax burdens and tax codes.
In California, he said, taxpayers pay 11.2 percent of their income to state and local governments. The tax burden in Texas is 7.9 percent, while in Louisiana it is 7.8 percent, Barfield said.
At the same time, a state business tax climate index puts Louisiana in the bottom half, behind Texas and Mississippi, Barfield said.
Barfield compared Louisiana’s tax code to his storage room at home. He said the room is filled with 11 years worth of tools, toys and junk that once served a useful purpose but now just clutter up space.
His point was that Louisiana’s tax code is cluttered with exemptions that can lower tax bills but requires skill to navigate.
For large, multistate businesses, navigating Louisiana’s tax system is a breeze because they have tax experts on the payroll, he said. Smaller businesses and sole proprietors face a more daunting task of spending their own time or paying accountants to comb through the hefty list of exemptions, he said.
The multiple levels of complexity act like a vise, stifling economic development, Barfield said.
He said the Jindal administration hopes to:
- Avoid increasing or decreasing taxes.
- Help the poor through private-sector job creation and growth.
- Measure the state’s financial health by the growth of the economy rather than by the growth of the state operating budget.
- Make Louisiana a destination for starting, locating and growing businesses.
The goal, he said, is to encourage economic development and financial stability while growing jobs.
After his speech, the revenue department released a copy of Barfield’s remarks, including an inadvertent inclusion of what was deleted during revisions. The changes included deleting references to President Barack Obama under the rationale of “leave the politics out of it because the facts are all we need.”
Another change was to strike the words “we gather today” because they invoked the feel of a wedding or a funeral.