Louisiana legislators weren’t too keen on doing away with the state’s income tax two years ago, but Gov. Bobby Jindal wasn’t actively involved in that effort. Whether the situation will be different now that the governor is putting the full force of his office behind the idea remains to be seen.
Actually, the repeal legislation proposed in 2011 was pretty tame stuff, but it still died on the vine as the session ended. Former Sen. Rob Marionneaux, D-Livonia, wanted to repeal the income tax over a 10-year period. That makes a lot of sense when you’re playing with the loss of revenues totaling nearly $3 billion. However, he had to weaken his plan when it appeared his phaseout bill wasn’t going anywhere.
The amended Marionneaux legislation simply set up a commission to study the possibility of reducing or eliminating the state’s income tax. It would have reported its findings to lawmakers by Jan. 6, 2012. It took seven votes before senators would even agree to consider the bill, but the House refused to go along as the session ended.
Some of the reluctance to eliminate the state income tax can be attributed to the fact Louisiana’s tax is low when compared to other states that levy income taxes. That is one of the reasons why Kiplinger.com, the company that has been publishing a financial and business newsletter since 1923, ranks Louisiana as one of the 10 best states for retirees. It also has the state as one of the top five with the highest state-local sales taxes.
Both of those are critical factors when considering changes in the state’s tax structure. One of the proposals being floated by the Jindal administration would raise the already-high state sales tax by nearly 2 percent. Louisiana ranks third highest in the country with a combined state and local sales tax average of 8.87 percent. Only Tennessee (9.44 percent) and Arizona (9.16 percent) are higher.
An additional $1.05-per-pack increase in the existing 36-cent cigarette tax is also a key part of the governor’s package. Supporters see that as more than a revenue producer. They believe it will effectively curb smoking, particularly among teenagers.
Jindal also wants to eliminate many of the sales tax exemptions on the books. Marionneaux said during his unsuccessful effort to repeal income taxes in 2011 that the state had $7.1 billion in tax exemptions and credits, and many of them could be eliminated to make up for lost revenues. The former senator made his point by standing atop a ladder in the state Senate to unfurl an extremely long list of those exemptions.
Spokesmen for the governor have repeatedly said there will be no effort to do away with state sales tax exemptions on household groceries, residential utilities and prescription drugs. You bet they won’t try because it would take a vote of the people to remove those exemptions, and it isn’t going to happen. Former state Rep. Vic Stelly of Moss Bluff said his 2002 income tax plan put those exemptions in the state constitution so they couldn’t be easily removed.
A fourth area being considered is making sales taxes apply to services that aren’t currently being taxed. The administration is looking at what services are being taxed in Texas, our closest competitor for new business and industry. Consumers in the Lone Star state pay sales taxes on cable and satellite TV services and on credit reporting, data processing, information, security, custodial and janitorial services. Taxing home repairs, lawn work, dog grooming, massages, carpet cleaning, pest control and boat storage are other services under review.
Online sales are also being eyed, but Congress would have to get into the act for that to happen. U.S. Sen. Mary Landrieu, D-La., and 52 other congressmen backed a bill Thursday that would tax Internet commerce, but it is a high hurdle to climb. A similar measure got nowhere during the last Congress.
What does the state get in return if the state income tax is repealed and some of the proposed taxing ideas are adopted? Tax Foundation reports Louisiana currently ranks 32nd in business tax climate, and the state would climb to fourth place.
Dan Juneau, president of the Louisiana Association of Business and Industry, in a recent column questions whether that is a real plus. He said almost $70 billion in new plant locations have been announced for Louisiana. He added that construction and oilfield services could be taxed under Jindal’s proposal.
“Have the companies which have announced the plant locations (largely due to the availability of low natural gas prices) figured a 10 cent or higher combined state and local sales tax into their investment plans for Louisiana?” Juneau asked. “If such a levy comes to pass it could have significant economic development consequences of its own.”
Jindal insists his administration hasn’t formulated a final plan, but is simply seeking input by throwing out a number of proposals.
“Everything is on the table,” he said last week in a rare news conference for Louisiana reporters. “That’s the way it should be,” he added.
Maybe so, but that is what worries a lot of people. Jindal said it won’t happen this time, but he has a habit of coming up with his final legislative plans at the last minute and ramrodding them through a more-thanwilling-to-oblige Legislature. Trying to find ways to replace $3 billion in state revenues is risky business that deserves long and serious consideration.
Just this once, we can only hope members of the Legislature won’t be as anxious as they have been in the past to do Jindal’s bidding without asking some serious questions.
Jim Beam, the retired editor of the Lake Charles American Press, has covered people and politics for more than five decades. Contact him at 337-494-4025 or [email protected].