Gov. Jindal’s Tax Swap Plan Now Calling For Higher State Sales Tax Rate Than Originally Thought
When La. Gov. Bobby Jindal's office first released their ideas for tax reform, officials said the state sales tax would increase from 4 percent to 5.88 percent as the state income tax would be eliminated. Now, make that 6.25 percent.
So, why the increase? Public Affairs Research Council President Robert Scott says the Jindal administration has adjusted the sales tax rate upward because they have promised this tax swap plan will be revenue neutral:
The administration has been working very hard on this for a long time and continues to work hard on it, and as they develop the numbers I think they are facing up to some of the difficult realities of how expensive the tax swap program is...This is a very expensive tax swap.
The revenue neutrality of Gov. Jindal's plan was the subject of a disagreement last week between Scott and La. Department of Revenue Secretary Tim Barfield, Jindal's point man on his tax proposal. Scott said Jindal's team is using revenue numbers from 2011, leading to a potential $500 million to $650 million shortfall in money. Barfield countered that the 2011 Fiscal Year data is being used as a "starting point" for their analysis.
According to this article, you can see how Louisiana would stack up against the nation if our state sales tax went up to 6.25 percent. Scott says it's hard to determine if the higher sales tax rate will make the plan revenue neutral:
It's a lot more expensive than just eliminating...the personal income tax. You've got all these other pieces that are adding up on it. And it's just a heavy burden. It's just hard to make up all that revenue. And that's what's driving the sales tax increases.
Scott says more adjustments to the tax swap proposal will likely occur during the legislative debate that begins April 8th. "I think the administration and the legislative fiscal office, which is taking a look at this, might have more recommended alterations than adjustments in their numbers as they go along," says Scott.