Tax-Shift Plan Would Raise Taxes on Bottom 60 Percent of Louisiana Households

by David Gray

The majority of Louisianans would pay higher taxes under Gov. Bobby Jindal’s proposed tax shift plan, according to a report released Monday. While the top 1 percent of income earners will get an average tax cut of nearly $30,000, the bottom 60 percent of Louisiana households will actually see their taxes rise if the state income tax is replaced by a 56 percent increase in the state sales tax.

These details are contained in a new report by by the Institute on Taxation and Economic Policy. According to the group’s latest analysis, the poorest 20 percent of Louisianans will pay an extra $283 under the governor’s plan. The next 20 percent of individuals will pay $441 more in taxes, while the middle 20 percent will fork over an extra $273.

Meanwhile, the top 40 percent of households would get an overall tax cut from the plan, with the biggest benefits accruing to the wealthiest households.

The new analysis differs sharply from earlier figures released by the state Department of Revenue showing that households in every income group would see a tax cut under the governor’s “revenue neutral” plan.

A main reason for this difference is that the administration’s analysis failed to account for the costs that would be passed on to individual taxpayers by businesses. Tim Barfield, the governor’s point-man on tax reform, recently said that businesses would see their taxes rise by at least $500 million under the plan, which is designed to attract new companies to Louisiana. The ITEP analysis assumes that many companies would adjust to this tax hike by raising the price of their products, creating a “hidden tax” that consumers would have to pay in addition to paying higher sales taxes on everything from clothing to haircuts and car repairs.

Additionally, the ITEP analysis accounts for the impact of the governor’s proposed tobacco tax increase. The governor is proposing to raise cigarette taxes by $1.05 per pack, which would disproportionately impact low-income households.

The bottom line from this important analysis is clear: The governor’s tax-shift plan is not reform, but would simply shift the state tax burden from the wealthiest households to those in the middle and bottom. That’s a change Louisiana can do without.

They include details about safety-net programs like Medicaid, tax credits for low-income workers and educational scholarships and help promote a better understanding of how safety-net programs affect different communities across our state.
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