Legislators trying to sort out the state’s proposed $24.7 billion spending plan for next year couldn’t help last week but turn their attention towards the governor’s plan to revamp Louisiana’s tax system.
Next door in another Louisiana House hearing room, Gov. Bobby Jindal rolled out his proposal that basically eliminates income taxes and raises sales taxes.
But in the House Appropriations hearing, the questioning of Secretary Stephen Moret, who was supposed to explain the 2014 budget for the state Department of Economic Development, kept veering back to the administrations tax overhaul. Moret is one of the key architects of the tax swap proposals, which promises to be the main issue of the regular session of the Legislature, which begins April 8.
“Let’s stay on our budget and not on the tax,” Appropriations Chairman Jim Fannin, D-Jonesboro, told committee members. “That’s in the other room over there.”
State Rep. John Schroder, R-Covington, then asked Moret: “You think that it’s going to attract more business?”
Moret responded that he was confident that simplifying the tax structure would improve the state’s business climate and promote faster job growth.
Fannin turned off Schroder’s microphone, admonishing him, basically, to ask about the tax revamp in the form of a budget question.
Schroder said his constituents tell him they hear all the talking points about how well the state’s economy is doing, and yet Louisiana is one of the few state governments in the nation that has to cut services year after year — at least a $1 billion shortfall each year since 2010 — because of shrinking revenues.
“We hear how rosy things are going to be. We’re banking on the roses to bloom. The roses don’t bloom; we’re back here cutting,” Schroder said.
Moret said the use of exemptions to paying state taxes has grown by more than $1.2 billion in the last “three or four years,” taking that money out of the revenue stream. “We had a lot of Louisiana companies that went from paying significant income taxes to paying zero, literally,” Moret said.
Louisiana has 468 “statutory, constitutional or federal mandated tax incentives, credits, exclusions, deductions, preferential tax treatments, tax deferrals, and rebates” valued at about $6.8 billion in fiscal year 2011, according to Moret’s Department of Economic Development and the state Department of Revenue.
Part of the plan to revamp the state’s tax system is rolling back about 200 exemptions, which would result in $114 million in additional revenue, according to Jindal’s press office.
The centerpiece of Jindal tax plan is the elimination of the state’s personal income tax and corporate income and franchise taxes, which bring in about $3 billion a year. To help replace those revenues, Jindal also wants to increase cigarette taxes by more than $1 a pack. He wants to start collecting sales taxes on different categories of services as well as goods and called for raising the 4 percent state sales tax by 1.88 percent, which is a 47 percent increase, for about $2 billion.
“Eliminating Louisiana’s income tax and raising the sales tax would jeopardize our state’s economy while raising taxes on the middle class and low-income families,” Jan Moller, director of the Baton Rouge-based Louisiana Budget Project, said in a statement. “The plan just shifts who pays taxes, and a tax shift is not tax reform.”
In its coverage, Reuters identified Jindal as a “potential candidate for national office” and noted that similar plans have been floated by Republicans in Nebraska, Kansas and North Carolina this year. Washington, D.C.,-based anti-tax advocate Grover Norquist, famous for getting elected officials to pledge to oppose tax increases, praised Jindal’s plan.
But back in Baton Rouge, a number of legislators voiced questions and concerns.
One of them, for instance, state Rep. Eddie Lambert, R-Prairieville, asked whether a more limited tax revamp would be more appropriate than a massive undertaking being pushed by the governor.
“I’d rather do away with exemptions and the rebates,” said Lambert, a member of the House Ways and Means committee that will consider the governor’s legislation first.
Mark Ballard is editor of The Advocate’s Capitol news bureau. His email address is firstname.lastname@example.org.