Barry Erwin, president of Council for A Better Louisiana, said Monday that Louisiana’s tax system isn’t broken but could be better.
Speaking to the Press Club of Baton Rouge, Erwin said exemptions clutter up the state’s tax code. “We can work on some things to improve our tax structure and make it more CEO friendly,” he said.
In the legislative session that starts April 8, Gov. Bobby Jindal is expected to ask legislators to eliminate the state’s personal income and corporate taxes. The ideas the governor is considering for replacing revenue apparently include raising the state sales tax nearly 2 cents per dollar, increasing the state cigarette tax by more than $1 per pack and eliminating severance tax exemptions.
CABL, a Baton Rouge-based public policy group, is studying the tax plan even though the governor has released few details.
Erwin joked that the upside to knowing so little about the plan is that he cannot get anything wrong.
He said several issues are vital to the plan’s ultimate success, including:
- The transparency and trustworthiness of the supporting data.
- The short-term and long-term impact on the state operating budget.
- The fate of state sales tax exemptions that erode the revenue base.
Erwin said the governor’s changes will affect every taxpayer, business and local government in Louisiana.
The Tax Foundation, a national think tank on tax policy, currently ranks Louisiana’s state and local tax burden as below the national average. However, the foundation ranks Louisiana as 32nd in business tax climate.
Erwin said the foundation is measuring the complexity of the state’s tax system, which requires taxpayers to take exemptions to lower their tax bills.
He said he used to be of the mindset that chief executive officers are sophisticated enough to figure out their ultimate tax burden in Louisiana is low. He said he has changed his mind.
Companies dependent on the state’s natural resources have no choice but to do business here while other companies can be more choosy, Erwin said.
“We congratulate the governor for bringing up the idea of tax reform,” Erwin said.
At the same time, he said, there are concerns about eliminating the state’s income taxes and increasing the state’s 4-cent sales tax.
A lot of households in Louisiana make less than $50,000 a year, he said. “We’re not a rich state,” Erwin said.
Another issue, he said, is creating a single sales tax collector. The issue is a thorny one because local governments are afraid the state will keep their money or not give them the right amount, he said.
The issue is an important one because legislation that would allow states to collect more revenue from online sales hinges on a single sales tax collector, Erwin said.
Overall, the opportunity exists, he said, to make tax system changes that will benefit Louisiana now and for years to come.