POLITICS

Bobby Jindal Pushes Ahead With Plan To Raise Taxes On 'Bottom 80 Percent Of Louisianans'

03/14/2013 03:31 pm ET | Updated Mar 14, 2013

Louisiana Gov. Bobby Jindal (R), last seen "denouncing Washington" in a speech as if that were some kind of original idea, has put together his detailed plan to eliminate his state's income tax. Per Reuters, Jindal is now "the first U.S. governor to offer a detailed plan to eliminate his state's income tax." He will likely not be the last.

Jindal's proposal, which he's been talking up since January, would offset (at least partially) the revenues lost by eliminating the income tax by raising the sales tax from 4 percent to 5.88 percent. In addition, the plan would simultaneously "broaden" the sales tax to apply it to additional services, while exempting many other services entirely. (Who gets the exemptions? According to Reuters, they include "healthcare, legal, construction, oil and gas services, education and possibly others." So basically interests with powerful lobbies.)

As Reuters goes on to note, however, passing his tax plan could be something of a sticky wicket for Jindal:

The plan "will not even get out of the House of Representatives" because of the taxes it would raise, said C.B. Forgotston, a political commentator and former legislative aide in Louisiana, who is often critical of Jindal.

The plan would need Democratic support to become law and Forgotston said that was unlikely to materialize because the bill does not increase overall revenues for the state.

Left unsaid is the fact that Jindal's plan is terrible policy. Not only would it not generate additional revenues in an already low-service state, the revenue it does raise comes primarily from the working- and middle-class Louisianans who are already being underserved in the first place. The Institute on Taxation and Economic Policy has panned the plan as a de facto "Tax Increase on Bottom 80 Percent of Louisianans":

  • The bottom 80 percent of Louisianans in the income distribution would see a tax increase from repealing the personal and corporate income taxes and replacing them with a higher sales tax.
  • 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, if no low income tax relief mechanism is offered.
  • 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 1 percent—a group with an average income of well over $1 million. Louisianans in the top 1 percent would see an average tax cut of $25,423, or 2.3 percent of their income under the plan described above.

That said, the Louisiana legislature will take up the issue in April, and the debate might be coming to a state near you shortly thereafter. Already, similar ideas are being mulled by governors and policymakers in Kansas, Nebraska, Missouri and Oklahoma.

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