Beam: Income tax repeal resurfaces

By By Jim Beam / American Press

Gov. Bobby Jindal wants to do away with

the state income tax, and conservatives are elated over the

possibility. The governor

was lukewarm to the idea two years ago, but he has obviously had a

change of heart. Eliminating individual and corporate income

taxes is now the key part of a tax reform plan the governor said

he will pursue when the Legislature meets in April.

Former state Sen. Rob Marionneaux,

D-Livonia, and Rep. Hunter Greene, R-Baton Rouge, authored two repeal

bills in 2011. They

amended them to phase out the income taxes over a 5- or 10-year

period when it appeared any speedier repeal would be met with

stiff opposition. Even that compromise wasn’t enough to pass a

weaker bill that only set up a special committee charged with

coming up with a repeal plan by Jan. 6, 2012.

Why would anyone in his right mind oppose eliminating incomes taxes in Louisiana? For starters, Jindal said he wasn’t going

to take the issue seriously until supporters came up with a spending plan. It appears he has put together a spending plan

of his own.

Legislators also voiced reservations two years ago and refused to go along. Chief among the doubters was none other than state

Senate President John Alario, who now shepherds Jindal’s programs through the upper chamber.

“We need to get this slowed down somewhat,” Alario told his colleagues in 2011.

Alario re-routed Marionneaux’s income

tax repeal bill to the Senate Finance Committee after it had been

approved 7-1 by the

Senate Revenue and Fiscal Affairs Committee. It never came up for a

vote. The House never voted on Greene’s legislation, either.

The odds are Alario will now say he has experienced an awakening.

OK, how much money are we talking about

here? During the year that ended June 30, 2012, the state collected

$2.5 billion in

individual income taxes and $374 million in corporate taxes. That

is nearly $3 billion total. However, that is only part of

the problem. Lawmakers are also faced with a projected shortfall

in the 2013-14 state budget of $1.2 billion.

Now, it’s a $4 billion problem. Higher

state sales taxes are the only revenue source capable of making up a big

chunk of that

$4 billion. The current 4-cent state sales tax brought in $2.6

billion last year. Double that and you are still just over

halfway home. However, the highest increase even being considered

by the Jindal administration is 3 percent, or a total state

sales tax of 7 percent.

Add that to local sales taxes that are 4

or 5 percent, and we are talking about a sales tax of about 11 or 12

percent. The

Tax Foundation has already reported that Louisiana has the third

highest sales tax rate in the United States when state and

local taxes are added together — a combined rate averaging almost

8.9 percent.

Tim Barfield, a key administration spokesman on the tax issue, said there are other options in addition to a higher sales

tax. Some sales tax exemptions could be eliminated, he said, and tobacco and other sin taxes could be increased.

Barfield said groceries, medicine, utilities and gasoline are exempt from the state sales tax, and that wouldn’t change. Of

course it won’t. Those exemptions are protected in the constitution and getting the voters to change wouldn’t get to first

base.

No one will argue with Alario, who said, “The devil is in the details.” And right now we don’t know any details.

Sales taxes are a heavy burden for the state’s poor, but Barfield said they would be protected from higher taxes.

“They would be in no worse position than they are today,” he said.

Democratic Party spokesmen aren’t so sure.

“This proposal is extremely regressive in nature and we’d have to be very, very careful before we take that particular step,”

said Rep. John Bel Edwards, D-Amite, chairman of the House Democratic Caucus.

Texas doesn’t levy an income tax, and conservatives say that is why Texas is stealing Louisiana industries. You have to wonder

about that in light of the billions of dollars industries are getting ready to spend just in Southwest Louisiana. However,

there is no question the absence of an income tax is welcome news in a lot of quarters.

Other states without income taxes are Alaska, Florida, Nevada, South Dakota, Washington and Wyoming. New Hampshire and Tennessee

only apply state income taxes to interest and dividends.

On the plus side, income taxes are deductible on federal income tax returns and sales taxes are not. Property taxes are also

higher in states without income taxes.

Opponents of Jindal’s plan say he likes

to cut taxes for wealthier citizens and then cut health care and higher

education

to pay for the cuts. They believe persons living near the borders

of other states will shop outside Louisiana or make wider

use of online purchases to avoid higher sales taxes. Buyers are

supposed to pay state sales taxes on their Internet purchases,

but enforcement is virtually impossible.

Actually, there isn’t much surprise about the reaction to Jindal’s plan. Conservatives love it; liberals don’t. What we don’t

know is how the vast majority in between feels.

We will have a better handle on that

when the Legislature considers the governor’s plan. That is when we will

find out whether

two-thirds of its members have also had a change of heart on this

issue. That is the margin that would be needed to increase

the state’s sales taxes.

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Jim Beam, the retired editor of the American Press, has covered people and politics for more than five decades. Contact him at 494-4025 or jbeam@americanpress.com