PAR raises concerns about Jindal tax swap plan

BATON ROUGE (AP) — Gov. Bobby Jindal's plan to get rid of state income taxes in favor of higher sales taxes could weaken the

state's income foundation for providing services to the public, a nonpartisan government watchdog organization says.

"A repeal of the individual income tax could create a more attractive perception of the state's tax climate, but such a move

runs the risk of destabilizing the state's revenue base and would likely set the stage for increased taxes in the future,"

says a report released this week by the Public Affairs Research Council's tax advisory panel.

The Baton Rouge-based organization also said a shift to a sales tax-focused system could fall more heavily on the poor, retirees

and the disabled and could put Louisiana stores at a disadvantage as people shop online and out-of-state to escape higher

sales tax rates.

Three former budget advisers to governors

serve on the 15-member study group, which also includes others with

experience in

economics, accounting and business. Its commentary was PAR's first

response to Jindal's still sketchy proposal to eliminate

personal and business income taxes in exchange for higher state

sales tax rates and the removal of some tax breaks currently

on the books.

The Republican governor hasn't released

details of the combination he would use to make up the loss of nearly $3

billion in

lost personal income taxes and corporate franchise and income

taxes, and PAR's analysis noted it will continue to review the

ideas as more details emerge.

Jindal's point person on the tax code

rewrite, Revenue Department executive counsel Tim Barfield, said the

state's 468 tax

exemptions, credits and exclusions make the tax code too

complicated and discouraging to businesses. He said the state sales

tax, currently 4 percent, is a more predictable revenue stream

than income tax.

"When you look at the data and look at it

across 50 states and here in Louisiana, sales tax revenues have been the

most stable

form of revenue. They've had the smallest swings from high to low,

they correlate with the economy, and that's very important

to us," Barfield said Friday.

PAR's study group raised concerns about the

loss of the diversified tax revenue and an overreliance on one primary


of income that would make up the bulk of the state's general fund,

saying the income tax "is an important component of Louisiana's

overall balanced and stable tax structure."

Barfield disagreed, saying if both types of

tax streams are tied to the economy, like income and sales taxes, having

two sources

of funding doesn't necessarily lead to more stabilization because

they both fluctuate with economic improvements and declines.

He pointed to data that showed more significant dips and vacillations in Louisiana's income tax revenue, compared to sales

tax revenue, during the recession.

"Sales tax just seems to be a more reliable form," he said.

PAR's panel also noted an increase in sales taxes won't just fall harder on low-income families, but also could heavily hit

public employee retirees, military retirees and people on disability who don't pay income taxes but will be forced to pay

the higher sales tax rates.

Barfield said the administration is considering ways, like a possible tax rebate, to help shrink some of the increased costs

of the sales tax hike for low-income workers, and he said the administration is looking at the impact on other groups that

don't pay income taxes.

But he said the focus for a tax rebate or other way to lessen the impact of a sales tax hike is on the poor.