Erwin: State’s tax system isn’t broken

Advocate staff photo by BILL FEIG -- Barry Erwin, president of Council for a Better Louisiana, speaks during Monday’s meeting of the Press Club of Baton Rouge.

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.

Comments

1) Comment by nimby? - 05/03/2013

in a recent survey 100 percent of those asked said everyone else needs to pay more taxes ...

2) Comment by WhoCares - 05/03/2013

Does anyone else think Barry Erwin resembles Rick Moranis??!

3) Comment by Diogenes - 05/03/2013

The problem with Jeffsadow is that he accuses others of not knowing what they are talking about, when it is he that is ignorant and or mistaken. Sales tax is stable so long as consumption is stable, but when the economy hits rough times and slows down consumption inevitably slows and revenue generated from sales tax shrinks. To say that there is no relationship between the willingness and ability of consumers to buy stuff and sales tax revenue is to deny mountains of consumer and tax data. If you don’t believe me just look at Louisiana’s revenue generated from sales tax, which dropped from about $824 million in the third quarter of 2008 to about $614 million in the first quarter of 2010, which is about a 25% drop in tax revenue. Not what I would call stable. As for who killed the Stelly Plan, I guess Jeffsadow missed Gov. Jindal’s statewide announcement of his “Stelly Elimination Plan” in 2008. All you have to do is use Google, now come on Jeffsadow, you can use Google, can’t you?

4) Comment by jeffsadow - 05/03/2013

Unfortunately, @diogenes does not know what he is talking about. First, it is universally acknowledged that the order of stability in taxation for government is property, followed by sales, followed by income taxes, the least stable/most fluctuating. Second, the Stelly changes did not grant large exemptions to "a specific group of businesses," but in fact made permanent broader exemptions or lower rates for individual purchases of unprepared food, prescription drugs, and utilities. Finally, Jindal at first was very hesitant to make these changes; they really were driven by the Legislature and he jumped on the train at the very end. Please check facts before your post, or else your argument is garbage in, garbage out.

5) Comment by Mygulfbleedsforu - 05/03/2013

As a few continually point out, including you, foldgers, perhaps unintentionally, the sales tax side of the equation will never make up for the revenue loss.

6) Comment by foldgers - 05/03/2013

You mean to tell me, if I go to Bestbuy and purchase an LED TV, blue ray player and a few blue rays movies all for $1000, I will have to spend an extra $20? Yet, if I go buy $1000 worth of milk, bread, baby food and other ESSENTIALS, I would NOT pay anything extra?? What a horrible way to hurt the poor and middle class, making them pay $20 more for every $1000 they spend on stuff they do NOT need to live.... all the while, not have ANY state taxes taken from their pay checks. Not to mention either, go buy the stuff online and it is a win win!

7) Comment by Diogenes - 05/03/2013

Mr. Erwin is correct and represents a voice of reason in opposition to the nonsense coming out of the Governor’s office. Louisiana’s revenue system was fine until Gov. Jindal ramrodded the revocation of the Stelly Plan through the Legislature. By abandoning the Stelly Plan in order to give big tax cuts and exemptions to a specific group of businesses, he went from the relative stability of an income tax based revenue system to an unstable sales tax based revenue system. Now he wants to compound his prior mistake by making an even larger mistake! There are two main problems with a sales tax only system of revenue. 1. It is unstable and dependent on the economy remaining stable. When we have an economic down turn (like we have RIGHT NOW) people have less money in their pockets and spend less, consequently there is less sales tax revenue. 2. Sales tax is inherently regressive and impacts the middle class, the poor and retired folks far more than it does wealthy folks. The simplest fix to Louisiana’s Revenue problem is to reduce the huge numbers of exemptions and tax exclusions. By doing so Louisiana’s revenue would increase, the tax burden would be spread among Louisiana citizens far more fairly and our tax code would be greatly simplified. Unfortunately, the Governor does not want to really fix Louisiana’s revenue system, he wants to make political points that will help him run for national office.

8) Comment by postscript56 - 05/03/2013

"He said several issues are vital to the plan's ultimate success, including: ..." I don't for a second believe anyone in this adminstration will transparently present trustworthy data. Nor will we get an unbiased assessment of the impact on the operating budget. We will get lots of "selling." Know what? I don't want to be sold. I want to be convinced. If you're so sure of your position, give me the data - all the data - and let me be convinced. But if you cherry-pick, if you obfuscate, if you engage in rhetoric then I know I am being sold a bill of goods.

9) Comment by Mygulfbleedsforu - 05/03/2013

Lawyer Dan, I believe Mr. Erwin is referring to the federal Marketplace Fairness Act that's being talked about a lot lately on Capitol Hill.

10) Comment by LawyerDan65 - 05/03/2013

One correction - Congress has yet to actually pass any legislation that would allow Louisiana,or any other State, to force on-line sellers to collect and remit State ot local sales tax. Until they do, internet sales tax revenue is pie in the sky. BTW a buyer in LA does owe sales tax for internet purchases already, the issue is there is no practical means of collecting.