CABL sees opportunities and concerns in tax reform
CABL President/CEO Barry Erwin says he used to think big companies were sophisticated enough to realize that Louisiana has a low tax burden, even if you have to navigate a complicated maze of tax breaks and exemptions to get to the low burden. But he says he has come around to the idea, championed by the Jindal administration, that a simplified "CEO-friendly" tax structure will help the state attract new businesses.
At the same time, Erwin says, there's a benefit to a diverse revenue base that includes both income and sales taxes. While Jindal is calling for "revenue-neutral" tax reform that eliminates income and franchise taxes while raising sales taxes and broadening the sales tax base, Erwin says officials should be mindful of future revenue needs, given the tight budgets of the past five years.
"We've got a lot of pent-up demand," he says. At some point, the state may want to consider increasing spending for education, giving raises for teachers and state employees, and dealing with its retirement costs, and Erwin suggests it's a mistake to assume "where we are right now [in terms of revenue] is perfect."
Speaking to the Baton Rouge Press Club today, Erwin laid out the following five points that he says should frame the tax reform discussion:
• Data: Transparent, credible data will be crucial for evaluating any tax reform proposal.
• Revenue neutrality: There are two questions to answer: Will it be revenue-neutral in the immediate future? And will it provide enough revenue to make needed investments for the years to come?
• Exemptions: Broadening the sales tax base is a necessary component of the proposed tax swap, but officials should keep in mind that every exemption was put in place for a reason, and some of those reasons may still be valid.
• Impact on local governments: A higher state sales tax may make it harder to pass or renew taxes for local purposes.
• Impact on low- to moderate-income residents: Sales taxes tend to hit the poor and working classes hardest, although the administration is investigating ways to mitigate that impact.
Whatever lawmakers do will be difficult to undo, he suggests.
"If we get rid of corporate and personal income taxes, they're gone forever, probably," Erwin says.
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