DALLAS – The price has gone up for Louisiana Gov. Bobby Jindal’s plan to replace the state income tax with additional revenue from a higher sales tax.
The administration will file a bill calling for an increase in the sales tax to 6.25% from the current 4%, said Tim Barfield, executive counsel at the state Department of Revenue. The initial proposal was to raise the rate to 5.88% on Jan. 1, 2014.
Jindal wants to eliminate the corporate and personal income taxes and fill the $3 billion a year revenue hole that would create by raising the sales tax rate. The sales tax base would be broadened by including more than three dozen services not currently taxed.
Questions raised by political rivals, government watchdog organizations and legislative fiscal experts about the validity of Jindal’s revenue estimates were acknowledged by Barfield late last week.
“We have been working with the Public Affairs Research Council, the Legislative Fiscal Office, various industry stakeholders, and legislators to ensure that we are using the best data available to meet our goal of revenue neutrality as well as our goal of ensuring that families at every income level will be better off,” Barfield said.
The final tax rate will be determined during the legislative process, he said.
“The legislation that will be filed will include a sales tax rate of 6.25%,” Barfield said. “This has been and will continue to be a collaborative process.”
A tax reform package of 11 bills will be filed before the Legislature convenes April 8 for a 90-day session, he said.
The state sales tax in levied in addition to local sales taxes and if the 6.25% rate is approved, it would bring the sales tax rates in Baton Rouge and New Orleans to more than 11%.
The original tax plan would have brought in $500 million a year less than what the administration had projected as revenue neutral, the Public Affairs Research Council said last week. The flawed estimates were based on invalid data from fiscal 2011, when the economy was sluggish and unemployment high, the group said
“The use of income tax figures that were depressed by the economic downturn two years ago, as opposed to the trend of recovery and higher revenues that the state is experiencing currently, can result in the plan not being revenue neutral,” the Council said.
Rep. John Bel Edwards, D-Amite, the minority leader in the House, said he did not trust Jindal’s revenue projections and questioned the entire tax revamp.
"This is a whopping increase on the middle class, retirees and poor folks, and it's really going to punish small business," Edwards said.
Treasurer John N. Kennedy used the upward revision to reiterate his call for a statewide vote on the tax reforms that he said would affect everyone and every business in Louisiana.
"This is one of the most far-reaching pieces of legislation that I've ever seen," Kennedy said. “I think Gov. Jindal ought to allow folks to vote on this.”
Jindal said he is focusing on eliminating the income tax and revising the state tax code, which he called complex, unstable, and unfair.
“The tax code is riddled with exemptions and overly complex, which is hurting our ability to get more business investment and create more jobs for our people,” he said.