Going One-On-One With Lafayette Sen. Page Cortez Over Gov. Jindal’s Tax Swap Plan

The 2013 La. Legislative Session is set to begin on Monday. Word came down Wednesday that La. House Speaker Chuck Kleckley of Lake Charles will set aside La. Gov. Bobby Jindal's tax reform legislation until internal analysis from the Legislative Fiscal Office is provided to lawmakers. Kleckley says he wants House & Senate members to have as much information as possible to help them make good decisions on the tax reforms.

Gov. Jindal's tax swap plan would end personal and corporate income taxes, and replace that revenue with an increased and broadened state sales tax base. While pushing his plan across the state, Jindal has been taking on critics of his proposal by laying out "myths" he says are being put out there against his plan.

So, I decided to sit down with La. Sen. Page Cortez of Lafayette, to get his thoughts on these "myths," as well as some other questions related to Jindal's tax reform legislation.

Gov. Jindal's first "myth" that he has addressed: Governor Jindal's plan will raise taxes on low-income and middle-class Louisianians.

Jindal says: "Eliminating income taxes and closing loopholes will reduce the tax burden for individuals and families across every income level." His administration outlines that in a chart. “The bottom line is that eliminating income taxes will put your money back into your hands so you can spend it how you want.”

Sen. Cortez's response: "Until we get the final fiscal office fiscal note, we really don't know who it's affecting because it's been a moving target so far. The increase and the expansions of the base and the increase from 5.88% to 6.25% (state sales tax), these are changing. So, until we get the legislative fiscal office to weigh in and tell us exactly who it will impact, we really can't weigh in on it."

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Another "myth" that Jindal is addressing: Eliminating income taxes will hurt government revenue and force future budget cuts.

Gov. Jindal says: "Eliminating loopholes and switching to a sales tax base will bring more stability in funding for government services."

Sen. Cortez's response: "Well, I think that there's always been an argument out there that property taxes are the most stable of all taxes and that sales taxes are the second most stable. But, with the changing environment of the Internet, we don't know. We know that this past year Louisiana had $800 million in taxes that went uncollected because they were Internet purchases out of state. That number was zero before the Internet existed and what will it be in ten years, we don't know. Unless the federal government changes what they call the Fair Pay Act and pass the Fair Pay Act, whereby the states would get these Internet sales taxes. So, we don't know if that's going to a stable form of revenue."

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Question: So, would property taxes skyrocket under Gov. Jindal's current tax swap plan?

Sen Cortez's response: "Well, I don't know how they could skyrocket because the property taxes are the part of the plan, as I understand it, it's simply sales tax and an expansion of the sales tax base...but property taxes are local in nature and have not been a part of the plan as I understand it."

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Question: Would Gov. Jindal’s tax reform plan get rid of Homestead Exemptions?

“No, this has nothing to do with property tax. So, it doesn’t have anything to do with Homestead Exemptions or property tax. It’s all really a local taxation issue. This is a statewide tax. It deals with a state sales tax. It doesn’t deal with a local sales tax; it doesn’t deal with a property tax.”

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Another "myth" that Jindal is addressing: Eliminating income taxes will hurt retirees and poor people.

Gov. Jindal says: "(My) plan protects low-income families, retirees, active duty military members who pay little or no income tax currently by creating the Family Assistance Rebate Program and the Assistance for Retiree and Military Rebate Program.

The Family Assistance Rebate Program compensates low income households based on the impact of the increased sales tax over any benefit from the reduction of income taxes.

The Assistance for Retiree and Military Rebate Program was designed to ensure that retirees, active duty military and other recipients of exempt income receive a net benefit under the tax reform proposal.

“These provisions ensure retirees, low-income residents and families at all income levels will be better off.”

Sen. Cortez’s response: “The fact that most retirees, state workers or teachers or most higher ed. university workers, you can go through law enforcement, etc., they receive a pension that currently is not taxed at the state income tax level. So, they would not be paying taxes but they currently don’t pay taxes. But they would be paying a higher sales taxes under the current plan...So that is a burden that’s being added to them. Now what the governor did was, in his plan he said, ‘we’re going to give you some compensation for that.’ Now, again that hasn’t been vetted with regards to the fiscal office as to who would receive that compensation and to what degree would they receive it.”

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Question: Specifically, what items would be taxed that would be at the detriment of low-income families. We know the plan protects food, prescription drugs and utilities from increased sales taxes, but what about other spending that’s not exactly considered a necessity by state government but are considered a necessity by people of lower incomes?

Sen. Cortez’s response: “What is protected under the plan is what they call ‘bare necessities’ - groceries, utilities and things like that. And they also have industries that were protected...So I’m not sure how we can quantify it at this point without the real numbers. Because yes, if you purchase something you will pay a higher sales tax...Now, the offset is: what were you paying in personal income tax? And, it’s going to be different for every person and every individual family and they’re going to have to decide, ‘Of that that I’m saving, how much would I have to spend at the increased sales tax amount to be my break even point?’”

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Another “myth” that Gov. Jindal has addressed: If the states sales tax rate is increased, Louisiana’s state sales tax rate will be one of the highest in the nation.

Gov. Jindal’s response: “With the increased rate, Louisiana’s state sales tax rate will be the 37th lowest in the nation. “The effective state sales tax rate would be between 1.14 percent and 4.96 percent, with low-income earners on the lower end of the scale and high-income earners on the higher end of the scale.”

Sen. Cortez’s response: “Well, the effective state sales tax rate is the computation of all the things you’ve purchased. Some of the things you’ve purchased had no sales tax on them. Some of the things you purchased had a state sales tax of 6.25%. What complicates the matter is that some states don’t have a sales tax, or they have a lower sales tax rate or the municipalities don’t have an added sales tax to it. What complicates it for Louisiana families is that each municipality runs their government in large part by the local sales tax. What they call the effective sales tax rate versus effectively what you would be paying in a sales tax that is a taxable item would be one of the highest in the country. Again, we don’t know what affect it would have, for example, on Internet purchases.”

To listen to Sen. Cortez's complete response, CLICK BELOW:

One of the things that I will point out is that the Governor’s package is a starting point. And I think that the most important thing that he did was start the conversation. And the process is that it starts in the House Ways and Means Committee and already we are hearing that it’s running into roadblocks just to be able get out of that committee. If it got out of that committee, it would require a two-thirds vote of the House of Representatives to get over to the Senate side. Then it would have to get out of the Senate committee, Revenue and Fiscal Affairs, and then it would require a two-thirds vote of the Senate in order to go to the governor’s desk. So, at each stop along the way, there can be amendments and changes made to this. So, I think it’s very important for the people to know that what we see today is highly likely not going to be what the final bill will be.

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Question: So, would Gov. Jindal’s tax plan be under one bill or two separate bills (that would go under two separate votes) because you’re taking away one tax and increasing another?

Sen. Cortez’s response: “Well, they could be under two separate bills...There’s so many bills out there that have similar concepts that some of them have the repeal, some of them have the repeal with the replace, some have setting up the tax courts as a periphery part of this package. There’s been conversation, but everything I’ve heard is that the governor has said over and over he will not sign a bill that repeals the income tax without replacing the revenue.”

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Question: So, what’s your position on Gov. Jindal’s tax swap plan, in its current form?

Sen. Cortez’s response: “Is there a problem out there? And I will tell you that, I’ve been in office six years, no one has called me and suggested to my office that there is a problem with the tax code. I have gotten emails and calls about problems solving some tax issues, you know, with streamlining issues of the Department of Revenue. So, if we can make it more streamlined, that’s great, I’m for that. If we can make it a fairer tax code, I’m for that. If we can reduce the personal income tax, and I use the word ‘reduce.’ Remember, the governor has always used at this point the word ‘repeal.’ Now, when you use the word ‘repeal,’ that creates the big problem of a large amount of money going away and, therefore, you need a large revenue stream to bring it back, which is the increase in sales taxes. My supposition is that through this process you may find that the middle ground might end up being a reduction in personal and corporate income taxes without the complete repeal and maybe no increase in the sales tax but maybe an expanded tax base....So I think that elements of it are good. Elements of it are giving a lot of my constituents some grief and some problems...The governor’s argument from the beginning was, ‘If we do this, it’ll bring more jobs to the state of Louisiana and more businesses to the state of Louisiana.’ I don’t know that we have quantifiable evidence on that, that’s part of what the fiscal office is going to bring to the table, in that, here’s what other states do, here’s what we currently do, here’s what we’re proposing.”

To listen to Sen. Cortez's complete response, CLICK BELOW:

Question: So, do you agree with Speaker Kleckley’s decision to wait on the internal analysis and move forward with other bills?

Sen. Cortez’s response: “Obviously, that’s sort of a lesson learned from last session. Last session, we had education reform and pension reform and we passed a number of bills, but three or four of the bills are in the courts right now because, arguably, we didn’t take our time in debating the issue and getting enough information. The bills ran through the session pretty quickly. I just think we need to take lessons from that. This is the whole revamp of the whole state tax system, let’s be real careful about this. This is playing with a lot of people’s lives. Anybody who’s employed in higher education or K-12 education is watching this very closely.”

To listen to Sen. Cortez's complete response, CLICK BELOW: