BATON ROUGE, La. (AP) — The leader on Gov. Bobby Jindal's proposed tax code rewrite said Tuesday the administration wants to keep most of the state's economic development incentive programs as part of the revamp.
Many of the programs overseen by the Department of Economic Development give credits or exemptions to income taxes, so they would need to be modified since Jindal is proposing to eliminate state income taxes in exchange for higher sales taxes.
"We'll either have to turn them into an outright incentive, or we'll have to look at it as offset against another tax type," said Tim Barfield, executive counsel at the Department of Revenue.
Incentive programs promote areas like research and development, digital media, film productions and facility modernization, for example. The tax exemption programs overseen by the economic development department totaled about $364 million in 2011, according to Jindal administration data.
"To the extent that the Legislature and the administration made a conscious decision to promote economic development, we want to keep those programs," Barfield told the annual meeting of the Louisiana Association of Business and Industry.
He outlined basic concepts Jindal will propose to lawmakers in the upcoming legislative session that begins in April.
The governor said he wants the tax code rewrite to be "revenue neutral," so that it would not generate additional tax dollars or siphon more money from state coffers.
That means maintaining the economic development incentive programs as either direct payments or a new type of tax break adds another cost to be offset, on top of the nearly $3 billion that would be lost by eliminating personal income taxes and corporate franchise and income taxes, as Jindal proposes.
How the pieces would work together and how much sales taxes would have to be raised are still being worked out, Barfield said. But the general outline, he said, is to eliminate other tax exemptions to save the state money, while also raising sales taxes.
After his speech, Barfield said property tax changes aren't currently being considered, and no discussions have been had about doing away with state severance taxes on oil and gas.
He told the LABI audience of business leaders and lawmakers that the state's structure of 468 tax exemptions, credits and exclusions make the tax code too complicated and make the cost of doing business in Louisiana seem higher than it is.
He pitched the state sales tax, which is currently 4 percent, as a more stable and predictable revenue stream than income tax that grows with the economy.
Initial concerns have been raised that the tax swap would raise taxes on low- to moderate-income families and give upper-income earners a tax break, because the sales tax hits everyone at the same rate while income tax rates are higher for people who are paid more. Some low-income workers don't earn enough to have to pay income taxes at all.
Barfield said the administration is considering ways, like a possible tax rebate, to help the poor shrink some of the increased costs of the sales tax hike.