Less than two weeks after Gov. Bobby Jindal’s effort to revamp the state’s tax structure died for lack of support, four of his predecessors weighed in Wednesday on what effective tax reform would look like in Louisiana.
Speaking at “PAISA Day,” sponsored by LSU’s Public Administration Institute Student Association, former Gov. Mike Foster said Jindal had the right idea in proposing a complete elimination of the state’s personal and corporate income taxes and corporate franchise taxes in favor of a higher state sales tax rate and taxing currently untaxed services.
Former Govs. Edwin Edwards, Kathleen Blanco and Buddy Roemer, however, said the best place to start would be a re-examination of the state’s hundreds of tax breaks that cost the state millions in revenue each year.
“I respectfully disagree that we should remove the state’s income tax,” Blanco said. “Louisiana is one of the lowest taxed states in the country.”
Calling the list of exemptions in Louisiana “endless,” many of which have “obsolete rationale,” Blanco said the generosity of Louisiana’s tax breaks is the problem, not the state’s income tax.
State tax breaks are the equivalent to a person spending money they don’t have, she said.
But real reform would be unpopular, she added. It would entail a thorough analysis of the entities currently given tax relief and an honest discussion about which exemptions should be reversed.
Edwards said he favors a $5 surtax on each barrel of oil produced in Louisiana in addition to a review of what he estimated were 200-300 sales tax exemptions currently allowed under Louisiana law.
“I’m the kind of fellow that thinks we should tax our natural resources rather than tax our people,” he said.
Under an Edwards plan, food, medication and utilities would be exempt from sales taxes, while the offshore drilling industry would be put under a microscope for possible savings.
Edwards said his plan would generate up to $300 million per year that could “evaporate” the state’s budget woes in a matter of years, he said.
Foster spoke of a pervasive climate in the state where a new tax is generally seen as a nonstarter. “It would be very difficult to pass anything that looks like a tax or raise any revenue that people perceive is coming out of their pockets,” he said.
Foster said the state should be focused on attracting more people to the state “who want to spend money.”
“We probably need to get rid of the income tax someday,” Foster said. “My suggestion is that you could do that and find enough to balance it off over 10 years … We have to have a tax system that attracts people. I think we could do it incrementally.”
Roemer said the first priority in any effort to reform Louisiana’s tax code is taking whatever action will promote growth.
He said Jindal was “unprepared” to push his tax-swapping plan through the state Legislature. Roemer said legislators would be shocked to find out how much money the state would have available if they stripped all exemptions from the books.
“We need a debate on tax reform,” he said. “We need to show people how they’d benefit. Gov. Jindal should reach out to past governors. You don’t learn from your victories; you learn from your mistakes.”