Gov. Bobby Jindal wants to erase tax exemptions for Habitat for Humanity, Councils on Aging, Mardi Gras krewes and actor Brad Pitt’s home-building foundation.
The details on the governor’s sweeping tax package emerged Tuesday as legislators got their first look at 95 pages of a draft bill. Additional information came from handouts that the Jindal administration distributed to members of the Louisiana House Committee on Ways and Means.
Committee Chairman Joel Robideaux, who will sponsor the governor’s tax plan, said he cannot envision a scenario in which a taxpayer loses through the changes.
“People want to know how is this going to help me (or) this is terrible,” said Robideaux, R-Lafayette. “When clearly they’re winners.”
The governor wants to eliminate the state’s personal income and corporate taxes beginning in January. To replace the nearly $3 billion in state revenue that would be lost, the governor wants to increase state sales tax to 5.88 percent, nearly triple the state cigarette tax, apply a tax to more services and erase certain tax exemptions.
At a hotel in Houma on Tuesday morning, Jindal promoted his tax plan to the South Central Industrial Association in what his press office described as the start of a statewide tour.
Jindal, according to the news release written by his office, disputed complaints that the plan would raise taxes on low-income and middle-class residents.
Later in the day, Tim Barfield, executive counsel at the state Department of Revenue, sat down before legislators to go into more detail about the plan.
Barfield said some pieces of the plan still are being drafted in preparation for the legislative session that starts next month.
Among the key points:
- Many tax filers could be required to file reports estimating the amount of sales tax they failed to pay on purchases, such as Internet transactions. They would pay the actual amount or what Barfield called a “safe harbor” amount.
- Businesses may get a cap on the percentage of sales tax collections they are allowed to keep as compensation for collecting the revenue for the state.
- Sales tax holidays would disappear although international visitors still would get a break on their purchases.
- The Jindal administration expects to collect roughly $1 billion by taxing professional and business services, including tax preparation, scientific research, travel arrangement and waste management.
Robideaux kicked off the meeting by asking the administration to discuss the math behind the proposal. “I would be interested to know a little more about where they’re pulling the numbers from,” he said.
The administration contracted with Ernst and Young, one of the so-called “Big Four” accounting firms, to help with revenue models.
Bob Cline with Ernst and Young told legislators that his firm used a model that incorporates national data and state specific data to model a state economy.
He said the model accounted for the possibility of not collecting 100 percent of taxes and adjusted separately for sales by Louisiana businesses to Louisiana customers, sales coming in from out-of-state companies and imports coming in for households and businesses.
For Louisiana companies selling to Louisiana customers, the assumption was the state would collect taxes on 90 percent of the base. For sales coming into Louisiana from companies outside Louisiana, it was assumed 75 percent of the sales subject to tax would result in taxes being paid. For imports, such as catalogs or Internet transactions, the amount of revenue potentially collectable fell to 15 percent.
“Maybe more than you might want to know. But it’s an overview,” Cline said.
The administration handed out spreadsheets detailing which sales tax exemptions would disappear.
The affected exemptions that divert the most state revenue include a phased-in sales tax exemption for fuses, belts, wires and other equipment used by paper and wood manufacturers and loggers. Construction services would not be subject to a state sales tax. However, Habitat for Humanity and Pitt’s Make it Right foundation, both of which build homes for the needy, would lose a state sales tax exemption on construction materials.
Louisiana shoppers also would no longer get state sales tax holidays for firearms, back-to-school supplies and hurricane season.
State Rep. Jeff Thompson, R-Bossier City, said the sales tax holidays generate big turnouts for retailers.
Barfield said later that discussions continue on the overall tax proposal.
“This will be a very busy process,” he said.