LABI reserves judgment on Jindal’s tax reform proposal

Heading into the legislative session that begins April 8, LABI has no position yet on Gov. Bobby Jindal’s proposed tax reform. “At this time, we don’t know what it will be,” says Jim Patterson, LABI vice president of governmental relations. However, that could change as soon as LABI sees the bill in early April. Earlier this month, the Department of Revenue confirmed some details of the tax reform proposal, including increasing the state sales tax from 4% to 5.78%, eliminating severance tax exemptions, and raising the cigarette tax by more than $1 a pack. At the same time, as Patterson noted this morning at the first of 10 legislative conferences that LABI is hosting across the state before the session starts, the administration wants to eliminate state income taxes and corporate franchise taxes. Patterson says those eliminations will create a $3 billion hole in the state budget. If the offset were to be strictly increased sales taxes without removing exemptions, he says, then the increase in state sales tax would have to be 4% to 8.5%. Patterson says LABI has to look at Texas to see what exemptions might be cut instead: telecommunication fees, Internet services, golf course fees, movie tickets, residential property repairs and remodels, and certain labors—photography, catering, landscaping and gross mowing. There could also be special tax rates on low oil-producing wells, and sales taxes on construction materials in the petrochemical industry. The administration may also look to create a sales tax commission and tax court, Patterson says. —Adam Pearson