Jindal details tax reform plan at Capitol
BATON ROUGE - Governor Bobby Jindal said the Louisiana's sales tax rate would increase from 4 percent to 5.88 percent under his plan to eliminate both the individual income tax and corporate income and franchise taxes.
If approved, the tax reforms would also boost Louisiana's combined local and state sales tax rate average to 10.75 percent, the highest in the country.
The governor and his aides laid out the plan's details publicly for the first time this morning at the state House Ways and Means Committee meeting. Jindal called the reforms package the "next step" for the state's improvement, and said they would be revenue neutral.
To do this the governor's plan proposes eliminating more than 200 tax loopholes, raising the state's cigarette taxes from 36 cents per pack to $1.41, and broadening the tax base by applying them to services not currently taxed.
Around 130 tax exemptions Jindal proposed eliminating would disappear with the removal of the individual income tax. Jindal told lawmakers he also didn't plan to eliminate exemptions which would help protect low-income residents and keep Louisiana's business competitiveness.
"For far too long average Louisiana citizens have felt the state's tax code works for the rich and powerful, but not for them. By closing special interest loopholes, we level the playing field for everyone," he said.
Seven states do not have an income tax, including Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Critics say boosting sales taxes to make up for the loss of income tax revenue hurts the poor and elderly the hardest, since they usually don't have enough income to pay taxes on but would have to deal with increased sales taxes.
Jindal said his plans would include protections to stop increased sales taxes for food, prescription drugs, and utilities. His office also released an analysis Thursday evening which claimed families in all income brackets would see overall tax burdens fall, but it relied on the creation of a new Family Assistance Rebate Program to pay low-income families back what they spent on higher sales taxes. That would replace the Earned Income Tax Credit, which would also go away the removal of the state income tax.
If approved, Jindal's plan would go into effect on Jan. 1, 2014. The governor said he would veto any plan which leads to an overall tax increase.