Under Jindal's plan, income tax replaced by new taxes on services

Louisiana Gov. Bobby Jindal speaks at the 40th annual Conservative Political Action Conference today in National Harbor, Md.

AP Photo/Manuel Balce Ceneta
Published: Friday, March 15, 2013 at 7:33 p.m.

BATON ROUGE — Your paycheck will grow larger, but in exchange the price of your haircut, cable TV and Internet service will go up if lawmakers agree to Gov. Bobby Jindal's rewrite of Louisiana's tax code.

Jindal wants to do away with state income taxes, but he doesn't want to shrink the state's tax revenue overall.

So to help make up the gap, the governor wants to charge $1.4 billion in new sales taxes on items that have not previously been taxed, under the plan outlined to lawmakers this week.

That includes home landscaping, visits to the museum and zoo, a pet's trip to the veterinarian, time at the tanning salon and more.

Businesses that pay outside accountants, architects, environmental consultants, computer programmers and janitors would see new taxes on those services.

In all, three dozen new categories of services would be swept into the state's current 4 percent state sales tax to drum up $961 million. They also would be included as the sales tax jumps to 5.88 percent under the governor's plan, to boost the total to $1.4 billion from the newly-taxed services, according to data from the Department of Revenue.

Local sales taxes would not be charged on the services covered by the governor's plan.

Jindal says the massive tax swap — which lawmakers will consider in the regular session that begins April 8 — would be better for economic development, state residents and state budgeting.

Income taxes for individuals and businesses would disappear in exchange for the higher and broader sales taxes and the removal of dozens of tax breaks.

The governor says a shift to reliance on sales taxes would make the tax code more consumer-driven, because people can pick and choose which goods and services they buy.

"We believe through sales taxes and other taxes that people can have more control about how much they pay in taxes, when they pay their taxes, unlike an income tax," Jindal told lawmakers.

He noted the more things that are taxed in the list of services, the less of an overall sales tax hike is needed to offset the loss of $3 billion in income taxes.

"The broader we make the base, the lower we can make the rate," Jindal said.

The state's constitutional sales tax exemptions for food, drugs and residential utilities will stay on the books, and new rebate programs would be available for low-income residents and some retirees to help offset a portion of the sales tax hikes, under Jindal's plan.

Critics say Jindal's tax changes would shift the burden of paying for state government more heavily onto low- and middle-income residents and give large tax breaks to the wealthy and big businesses. Jindal's administration denies it.

"It's the highest sales tax in the nation that he's proposing, it's the most regressive tax structure in the nation and it's an absolute tax increase on the people who can afford it the least," said Rep. John Bel Edwards, D-Amite, chairman of the House Democratic Caucus.

Other lawmakers are asking whether the creation of new sales taxes on services would cause more complications and more administrative headaches for businesses that provide the services to be taxed and the revenue department that will have to collect the taxes.

"It seems like it's going to take a lot of employees to ferret through all this," said Rep. Eddie Lambert, R-Gonzales.

Jindal's tax package faces a tough road to passage, needing a two-thirds vote from the House and Senate for any tax increases.


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