If Gov. Bobby Jindal has done nothing else with his proposal to eliminate income taxes and pay for it by raising sales taxes, he has opened up a healthy discussion about how Louisiana pays for services.
However, legislators — not to mention others — are right to be very cautious about embracing the so-far quite vague notions advanced by the governor. For one thing, the saying the devil is in the details does not begin to address the difficulties of assessing, much less passing through the Legislature, such a sweeping change to state finance.
Louisiana already has one of the nation’s highest rates of sales tax, state and local. It also has, for collateral reasons, one of the nation’s lowest levies of property taxes for local governments.
Throw into that mix an end to personal and corporate income taxes, and two things are likely to occur: the steepest sales taxes in the country, even if the administration raises more money by reducing some of the exemptions in the current tax code. A second thing is that local government becomes hamstrung, with sales taxes essentially off the political table for local government finance.
That has consequences down the road, as people forget that Texas ?— a giant state of immense resources — has high property taxes compared to Louisiana, and substantial state-level business taxes that are the functional equivalent of Louisiana’s corporate income tax.
All this means that we can’t declare that prosperity akin to Texas’ will come to us from an ill-thought-out copying of part of Texas’ tax scheme.
We also have some concern about the regressive nature of sales taxes, which pose special hardships for the poor, although Jindal administration officials have suggested that their tax plan would have measures to address this problem.
Late last year, LSU Professor Jim Richardson, an expert in Louisiana public administration, told the Press Club of Baton Rouge that Louisiana’s state and local tax burden is pretty close to that of Texas and Florida. It is the perception that is different, he said.
Until the governor demonstrates the benefits of a drastic revision of the state tax code, as well as the mechanical details, it’s best to withhold judgment for a while.