Gov. Jindal Releases Tax Reform Plan To State Lawmakers (Chart Included)
The much-anticipated tax reform plan from the Jindal Administration was presented to state lawmakers Thursday in Baton Rouge. The meeting was in response to La. House Speaker Chuck Kleckley's request to Gov. Jindal that his plan be presented by March 15th.
Jindal's plan seeks to eliminate $2.7 Billion in income taxes. That will be offsetted by over $2 Billion from increased sales taxes and a broader base. Jindal says the tax reforms are crucial to moving Louisiana forward:
Over the last ten years, three million new jobs in America were created. Sixty-percent of those new jobs were created in the 9 states without an income tax.
Tim Barfield, acting head of the La. Department of Revenue, says corporate income and franchise taxes would also come to an end as a result of Jindal's plan, but the tax swap plan would raise the state sales tax to 5.88% on most purchases, up from 4%. Barfield says many current sales tax exemptions will remain in place, such as constitutional-protected sales tax exemptions for food for home consumption, residential utilities, prescription drugs, and fuel such as gasoline and diesel. Barfield says eliminating other tax exemptions will bring in another $114-million annually.
Sean Lansing with Gov. Jindal's Office says, under the plan, effective sales tax rate will be between 3.12 percent and 4.34 percent, with low-income earners on the lower end of the scale and high-income earners on the higher end of the scale. Lansing says under the governor's plan, the state sales tax rate would be the 24th lowest in the nation.
What about the poor? The plan would also include rebates for retirees making less than $60,000 and low and middle income families. Barfield says they haven't forgotten that higher sales taxes could be an unfair burden on them:
We will convert the Earned Income Tax Credit into the Family Assistance Rebate Program (FARP). This is a program for low income families to offset the impact of increased sales taxes over any benefit from the reduction or elimination of income taxes.
FARP compensates low income households based on the impact of the increased sales tax over any benefit from the reduction of income taxes. Taxpayers with incomes of $20,000 or lower, will be eligible for FARP.
Under the plan, cigarette taxes would also go up to $1.41 a pack, up from 36-cents. Barfield says the plan also calls for enacting taxes on some services not currently subject to taxation - with some important exemptions including services relating to health care, education, oil and gas, construction, real estate, death or funeral services, financial and insurance services, legal services and advertisement buys.
Some of the services that could be subject to taxation are pet grooming, lawn care, hair styling, tanning, massages and more.
The proposed tax changes would go into effect January 1st. Lawmakers will debate the reforms when the session begins April 8th. Jindal says the plan is "the beginning of the discussion of how we want to work with the legislature and other stake holders on how we can improve the business climate in Louisiana."
The following chart was released by the Governor's Office on how families would be impacted under Jindal's new plan: