In the spring of 2011, when a 4-cent-per-pack cigarette tax was about to expire, Gov. Bobby Jindal made a big fuss over vetoing a bipartisan bill to extend it. The tax netted only $12 million a year — a fraction of what smoking costs Louisiana. Jindal was so desperate to maintain his "tax virginity" that he made a point of saying, "I have made a commitment to the taxpayers of Louisiana to oppose all attempts to raise taxes."
Bobby 2011, meet Bobby 2013.
The governor now wants to eliminate Louisiana's individual and corporate income taxes and corporate franchise fee — and make up the shortfall by raising sales and possibly cigarette taxes significantly. His proposal is still in development, but Jindal promises to make it "revenue neutral." To do that, he must break his promise never to raise taxes. His aides are talking about hiking the state sales tax as much as 75 percent — from 4 cents on the dollar to 7 cents. Louisiana already has the third-highest combined (state and local) sales tax in the country. The governor's plan would give us the highest — by far.
Jindal's plan also would eliminate many sales tax exemptions for new and existing businesses. If that's the case, it belies the governor's claim that his plan would grow the economy. Any plan that starts out by taxing consumers and businesses more would hardly promote economic growth. At its heart, the plan is a $3 billion wealth redistribution.
Don't get us wrong. We applaud any serious attempt at tax reform, and the governor at least has got everyone talking about it. If Jindal can find a way to reduce or eliminate income taxes without making Louisiana's poorest citizens and local businesses shoulder most of the burden, we'd rush to embrace it. Based on what we've seen so far, however, Jindal's plan is half-baked. (Interestingly, Team Jindal howls that skeptics should withhold criticism until the plan is final — yet the governor wastes no time lobbying lawmakers for the same sketchy plan.)
Jindal aides pledge some type of income tax relief for low-income Louisianans, but they're vague on specifics. Such relief is imperative. The Institute of Taxation and Economic Policy, based in Washington, D.C., says Jindal's current plan would increase taxes on the bottom 80 percent of Louisianans — while many of those in the top 20 percent would see annual tax cuts exceeding $25,000.
Worse yet, as the Public Affairs Research Council of Louisiana (PAR) and others have noted, Jindal's plan would tie state government to one tax — the sales tax. That is bad policy, plain and simple. There are three basic forms of taxation: sales, property and income taxes. Louisiana's property tax code is a laughingstock; if Jindal wants real tax reform, he should include property taxes in his plan. Moreover, every independent analysis notes that Louisiana's income tax rates are neither too high nor too low compared to those of other states. So why is the governor hell-bent to hitch future state budgets to the vagaries of the retail economy? Because it suits his presidential ambitions. If you doubt that, look at the conservative "think tanks" that have rushed to applaud Jindal for his plan — even though it is far from finalized.
Meanwhile, retailers and hospitality industry leaders are alarmed at the idea of a big sales tax hike. Retailers located near state borders would be particularly hard hit as customers drive past them to buy goods in Mississippi, Texas and Arkansas. Jefferson Parish President John Young, who has touted a boom in Jefferson businesses and restaurants, says businesses there would have a tremendous disadvantage against Internet retailers who charge no sales tax at all. We agree. In fact, Young's logic applies to all Louisiana retailers.
Last week, state Revenue Secretary Tim Barfield said Jindal will unveil the final plan shortly before the Legislature convenes April 8. We've seen this play before; it doesn't end well. Last year, the governor waited until the last minute to present specific legislation for his education reforms — then rammed them through the Legislature with little real debate. That is no way to do tax reform.
If the governor wants everyone to withhold judgment until his plan is finalized, he needs to finalize it soon — and present specific legislation no later than 30 days before the April session begins. Only then will businesses and citizens have adequate time to study the plan's impact and decide whether it's really good for Louisiana — and not just good for Bobby Jindal.