A vague proposal to eliminate income taxes and hike the state sales tax has elected officials of all political persuasions nervous. By Walter Pierce
Friday, Feb. 1, 2013
Gov. Bobby Jindal has at last found the prescription for our prosperity: make life so unpleasant for the poor and working class that they leave Louisiana and move to Mississippi. Think Swift’s “Modest Proposal” without the gristle and bone. Praise be.
This is hyperbole. The poor can’t afford to move. But through his ideological aversion to government revenue, i.e., taxes, and most recently via his plan to eliminate personal and corporate income taxes and make up for the lost revenue by hiking the state sales tax, Jindal is all but ensuring that life will get a little bit harder for the poor and working poor. Just under 3.5 percent harder, according to an analysis by the Institute on Taxation and Economic Policy, which finds that for the 20 percent of state residents at the bottom of the economic food chain, their tax burden via this swap would rise 3.4 percent. ITEP estimates that the bottom 80 percent of residents will pay more in taxes while the top 20 percent will see a net decrease in their tax burden.
Poor people in Louisiana don’t pay personal income taxes — they don’t have enough personal income. But they still have to buy stuff. Indeed the affluent will pay more total sales taxes because they buy more stuff. But the poor pay a larger percentage of their income on stuff.
This is classic trickle-down economics — help the “makers” by lowering their taxes and increasing their wealth and they’ll create jobs and prosperity for us “takers.” Unicorns and rainbows will ensue. Everybody gets laid. It’s an enduring mystery how supply-side economics isn’t as discredited in theory as it is in practice. Wealthy people don’t create jobs — middle class demand for goods and services does. But that’s another argument.
The devil is in the details with Jindal’s tax swap, and the administration hasn’t exactly been a fount of specifics. But there’s an aspect of this tax plan that has politicians of every political stripe sweating: Will any taxing authority — a city, a parish, a police jury, a school board — be able to convince voters to pass a sales or property tax in the future if Jindal’s tax swap is adopted by the Legislature this spring?
In terms of sales tax, Lafayette is relatively low-rent. Shoppers in the city limits pay 8 cents in sales taxes on every dollar: 4 cents go to the state, 2 cents go to the school board and the remaining 2 go to the city.
By most accounts Jindal’s still-vague swap would require raising the state sales tax by 3 cents — from 4 to 7 cents on every dollar purchase — for the plan to be “revenue neutral.” So let’s add that 3 cents to Lafayette’s sales tax rate. For every dollar spent in the city of Lafayette a shopper would pay 11 cents. Eleven cents on the dollar. Seem a little onerous?
Compare it to neighboring cities. To the east, St. Martinville’s sales tax is 8.5 cents, so they go up to 11.5. Crowley to the west and Abbeville to the south each have a 9.5 cent sales tax rate, and up north in Opelousas the current sales tax is 9.75 cents. Shoppers in Opelousas, if the swap is approved, would pay 12.5 cents on every dollar.
Don’t think for a second the tax swap doesn’t have Lafayette schools Superintendent Dr. Pat Cooper concerned. He’s been lobbying for putting a temporary (six years) 1-cent sales tax for facilities improvements before voters in November. And, according to a reliable source, Jindal’s tax swap plan — and the lack of details surrounding it — is the main reason why the Lafayette City-Parish Council in late January approved a resolution canceling a November ballot prop asking voters to increase the property tax devoted to our Parks & Recreation Department. Council members say publicly they want a comprehensive review of all taxes in Lafayette first, but they know if the state sales tax goes up 3 cents there’s no way voters will approve additional taxes for soccer fields and rec centers.
Jindal will probably get what he wants with the tax swap, whatever that is. He usually does. But will it be at the expense — literally — of every city, parish and school system in the state?
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