Tax ‘reform’ or ‘deform’?

When economists say “tax reform,” according to LSU economist Jim Richardson, they usually mean broadening the base, lowering rates, and making the system simple, fair and competitive while providing needed revenue. But Richardson, a member of the state’s Revenue Estimating Conference, wonders if the Jindal administration’s proposed overhaul is “tax reform” or “tax deform,” since it will require higher sales taxes and narrow the overall revenue base. “So you have a higher rate—which is contrary to what we typically mean by tax reform—and you have one rate [income tax] at zero,” he says. Richardson concedes the administration’s point that corporate income taxes are highly unstable, contributing to the need for state budget cuts, but says Louisiana’s personal income tax is “very competitive and very workable.” He agrees that the sales tax base should be broader, but says true tax reform would involve lowering the rate, not raising it, as Jindal plans to do. Jason DeCuir, assistant secretary at the Department of Revenue, says sales taxes alone will provide a more stable revenue stream for the state than the current overly complex system. The administration says the tax swap they’re proposing will boost economic development and improve the state’s standing with the conservative Tax Foundation from 32nd to fourth. “It’s very nice to examine [rankings],” Richardson says. “But I don’t think we should worship them.” —David Jacobs