Louisiana Governor Bobby Jindal this morning released details of his plan to eliminate income taxes in his state. The overall concept is very similar to one evaluated in our study “More Jobs, Bigger Paychecks,” and includes eliminating personal and corporate income taxes along with the corporate franchise tax, while broadening and raising the state sales tax. According to a statement, Jindal said:
“Everything we have done since entering office is about making Louisiana the best place in the world to find a job and raise a family. Our state is now at the top of many rankings for the best business climates in the country and we are competing for and winning major economic development projects. But we need to do more to stay competitive. States with no income taxes are outperforming other states in terms of economic growth and population growth.“Over the last ten years, more than 60 percent of the three million new jobs in American were created by the nine states without an income tax. Every year for the past 40 years, states without an income tax had faster growth than states with the highest income taxes. Economic growth in the nine states without income taxes was 50 percent faster than in the nine states with the highest top income tax rates. Over the past decade, states without income taxes have seen nearly 60 percent higher population growth than the national average.”
Overall, one must applaud Gov. Jindal’s boldness in proposing such a significant plan that would be a significant improvement over his state’s current tax structure. Some of the details of the plan, however, seem a bit ill-advised and hopefully would be worked out during legislative negotiations. These concerns include:
- Exempting too many services from the expanded sales tax base; this continues biases in the tax code and causes the sales tax rate to be higher than it should be
- Maintaining “vital local tax offsets and business competitiveness incentives” (i.e. targeted tax credits and corporate welfare)
- Increasing the excise tax on cigarettes to generate revenue
- Creating a “family assistance rebate program” (FARP) to low-income households. Creating yet another government welfare program is a bad move, as it will never be eliminated once it is implemented and will likely only grow larger over time in response to cries of “helping the poor.” Moreover, the felt need to address the alleged “regressive” impact of expanded sales taxes is based on completely faulty analysis, as I discuss here and here. That said, the proposed rebate program for retirees may be worthy of consideration, if it is means-tested to be targeted specifically at retirees drawing incomes low enough so as to not see any benefit from income tax elimination.
The Tax Foundation weighs in with their take here.
Jindal was first to unveil a detailed plan to eliminate his state’s income taxes, will NC follow his lead? If you hope so, go to www.noincometaxnc.org and sign the petition.
Good for Governor Jindal! This will be good for all of Louisiana, in the long run!!!!