Late last week details emerged of Louisiana Governor Bobby Jindal’s plan to eliminate nearly $3 billion in personal and corporate income taxes and replace the lost revenue with higher sales taxes. Knowing that sales taxes take the biggest bite out of low-income family budgets, the Institute on Taxation and Economic Policy (ITEP) decided to issue an analysis to determine just how that tax change would affect all Louisianans.
Though the governor indicated interest in some unspecified mechanism to mitigate the impact for the state’s poorest residents, he didn’t provide any details so ITEP couldn’t analyze it. But in any case, ITEP concluded that the “overall shift in tax liability is so dramatic that the plan is virtually guaranteed to have a regressive impact regardless of whether or not a low-income relief program is added to the package.”
In particular, ITEP found that the bottom 80 percent of Louisianans in the income distribution would see a tax increase. Specifically, the poorest 20 percent of taxpayers, those with an average income of $12,000, would see an average tax increase of $395, or 3.4 percent of their income. The middle 20 percent, those with an average income of $43,000, would see an average tax increase of $534, or 1.2 percent of their income. The largest beneficiaries of the tax proposal would be the top one percent, with an average income of well over $1 million, who'd see an average tax cut of $25,423.
You can read the 2-page analysis here.
The Governor said, “[e]liminating personal income taxes will put more money back into the pockets of Louisiana families and will change a complex tax code into a more simple system that will make Louisiana more attractive to companies who want to invest here and create jobs.” But this is doubly not the case. Far from putting more money back into the pockets of Louisiana families, his proposal would raise taxes on the poor and middle class. It would also threaten Louisiana’s ability to provide critical services (from schools to roads to a public health) in the future that are essential to the health of the state’s economy.
Fortunately, ITEP’s report is already helping inform the debate. Jindal tax reform proposal equates to increase for bottom 80%, Jindal tax plan draws mixed reviews and Cutting income tax is the easy part; filling the gap is trickier are a few of the news stories the report has generated. If Governor Jindal offers more specifics or modifications, you will find updated analyses here and at www.ITEP.org.
To see ITEP’s recent preview of state tax reform prospects nationwide, click here.