Gov. Bobby Jindal gave legislators a glimpse Thursday of a tax plan that would raise the state’s sales tax and tax movie tickets, hair cuts, dog grooming and other expenses.
The plan is part of the governor’s proposal to generate nearly $3 billion in revenue lost by eliminating the state’s personal income and corporate taxes.
Going to a play, getting the dog groomed and tackling major landscaping projects now would be taxed in an effort to generate $1.4 billion in new tax revenue for the state.
In a rare appearance before the Louisiana House Ways and Means and Senate Revenue and Fiscal Affairs committees, Jindal pitched the plan as a broad array of goals with fluid details. “I know this is not the beginning or the ending of the conversation,” the governor said to a packed committee room.
Jindal characterized the proposal as a way to grow the state’s economy. He said Louisiana lost $3 billion in adjusted gross income to Texas and $6 billion in income to other states between 1995 and 2010.
The proposal will be debated in the legislative session that starts on April 8.
Legislation detailing the proposal has yet to be filed. However, the Jindal administration gave an overview of the plan, which would take effect in January. The details include:
- Raising the state sales tax by 47 percent. The state sales tax would increase from 4 percent to 5.88 percent.
- Almost tripling the state cigarette excise tax by raising it from 36 cents a pack to $1.41 a pack. The increase would put Louisiana in line with what Texas charges.
- Eliminating half of the tax exemptions used by the oil and gas industry.
- Creating rebates for poor families and some retirees.
- Erasing scores of tax exemptions, many of which would disappear with the elimination of the state’s personal income and corporate taxes.
The governor’s changes would punt Louisiana to the top of the list of states with the highest combined state and local sales taxes. The average combined rate now would top 10 percent.
The plan’s unveiling quickly drew supporters and critics.
House Speaker Chuck Kleckley, R-Lake Charles, said the state’s current tax system is old and antiquated. “When we start, we’ll be first but other states will be battling to see who’s second,” he predicted.
Grover Norquist, president of Americans for Tax Reform in Washington, D.C., helped write a column Thursday that lauded Jindal for setting the gold standard for pro-growth reform.
Norquist is known for anti-tax pledges that many elected officials around the country sign.
“His proposal could mean more disposable income for families while increasing the job-creating capacity of employers,” Norquist and Patrick Gleason, the organization’s director of state affairs, wrote.
House Democratic leader John Bel Edwards, of Amite, characterized the proposal as the largest middle class tax increase in the state’s history.
“It will raise taxes on most Louisiana families, Louisiana workers and Louisiana small businesses in order to give tax breaks to out-of-state corporations and the wealthy. Louisiana retailers will be especially hurt,” Edwards said in a prepared statement.
Jindal told legislators that he wants the tax changes to be a collaborative process.
The governor said he worked to diminish the impact on the state’s most vulnerable citizens by proposing rebate programs for some retirees and “low income and middle income” families.
Tim Barfield, who is handling the governor’s tax package, later said the rebate for retirees would apply to those making up to $60,000 a year and the rebate for families would target those making $20,000 or less a year.
“I hope you can make me comfortable, because I’m uncomfortable right now,” state Sen. Bob Kostelka later told Barfield.
Barfield, executive counsel of the state Department of Revenue, walked legislators through more specific points of the plan after the governor gave brief remarks.
Kostelka, R-Monroe, said the Jindal administration is “betting on the come,” using a gambling term to imply the governor is banking on revenue that might not materialize.
Barfield said the administration crunched the numbers and did not just pull them out of the air. He said he wants Louisiana to go from good to great in tax rankings.
Some parts of the state’s tax structure would remain the same, while other parts would undergo dramatic changes, according to the plan. Sales tax exemptions on groceries, residential utilities, prescription drugs and fuel would remain in place.
Industry would keep sales tax exemptions on manufacturing, machinery and equipment — a tax break known as MM&E — as well as exemptions on nonresidential utilities, according to the proposal.
The movie tax credit program, which cost the state roughly $200 million in 2011, would undergo changes. Barfield said the program would cap allowable costs for actors’ salaries at $1 million.
Many states are moving toward taxing services, instead of just products, and Louisiana would join that trend.
The Jindal administration said service providers with annual revenue under $10,000 would be excluded.