Gov. Bobby Jindal and Tim Barfield, the governor’s top official at the Department of Revenue, presented the outline today of a massive overhaul of the state’s tax system to a legislative committee.
Both officials stressed they would continue to work with lawmakers and industry groups to hammer out the details.
“We are not presenting to you today a plan etched in stone,” Jindal says. “There are a lot of different ways to get to our end point, which is a better tax code for the people of Louisiana.”
Jindal wants to eliminate personal and corporate income taxes, as well as corporate franchise taxes. To raise the same amount of revenue, he wants to boost state sales taxes from 4% to 5.88%; increase cigarette taxes from 36 cents per pack to $1.41; assess sales taxes on a range of services not currently taxed; and eliminate or curtail certain tax breaks or incentives.
A list of exemptions the administration wants to eliminate will be available later today, a spokesman says. Some existing tax credit incentives for economic development will be available in another form, such as cash rebates or credits against other types of tax liability.
Barfield says he will defer to the Legislature in deciding the best way to deliver those incentives. Along with the “tax swap,” the administration wants to create a tax court, with jurisdiction over state and local tax matters, and a Louisiana Sales Tax Commission that would act as collector, auditor, interpreter, and rule maker for state and local sales taxes.
If lawmakers agree to the changes in the legislative session that begins April 8, Louisiana’s combined state and local average sales tax rate would shift to 10.75%, the highest rate in the country.
Tax exemptions on food, medications and residential utilities would remain in the constitution, and new tax rebate programs would help low-income residents and some retirees offset the sales tax hikes. No details were provided on how the rebate programs would work, what they would cost or whether the rebates would be capped. The changes would kick in Jan. 1, 2014, says Jindal, who has posted more details of his proposal on his website here.
Here’s a look at some of the changes in the Jindal administration’s proposed rewrite of the state tax code, as outlined to lawmakers on Thursday:
—Income taxes: Would eliminate Louisiana’s personal income tax and corporate income and franchise taxes.
—Sales taxes: Would increase Louisiana’s state sales tax rate from 4% to 5.88%, which would boost Louisiana’s combined local and state sales tax rate average to 10.75%, the highest in the country. State sales taxes would be charged on a new list of services not currently taxed, like haircuts, landscaping, cable TV, pet grooming, tanning salon visits, agricultural services and data services. Exempt would be health care, education, construction, real estate, financial services, advertising purchases, legal services, oil and gas services, and funerals. Also, there would be rebate programs for low-income households and for retirees with less than $60,000 adjusted gross income to help offset the increased sales tax costs.
—Tobacco taxes: Would increase cigarette taxes from 36 cents per pack to $1.41 per pack and would raise variable rates for other tobacco products to 68% of the manufacturer’s price.
—Tax breaks: Would eliminate more than 200 tax breaks, including 130 income tax breaks that would disappear with the removal of the income taxes.
—Economic development incentives: Would maintain economic development incentive programs, but would make tweaks to limit some programs.
—Tax court: Would create a single tax court consisting of three elected judges to hear all types of tax cases, with jurisdiction over state and local matters.
—Tax administration: Would create a uniform sales tax base for remote sales made by vendors not located in Louisiana, and create a Louisiana Sales Tax Commission that would act as collector, auditor, interpreter, and rule maker for state and local sales taxes. If legislation passes Congress requiring states to compel remote sellers—such as those that sell products over the Internet—to collect and remit sales taxes, Louisiana would be in position to participate. However, anticipated additional tax revenue from Internet sales is not included in revenue projections for the tax overhaul.
Editor’s note: The Associated Press contributed to this report.
