Gov. Jindal's Bad Tax Change

Dear editor: 

Governor Bobby Jindal wants to boost Louisiana state sales tax from 4% to 6.25% (2.25% increase) and include previously untaxed services, like haircuts, cable TV, museum visits, accounting services and landscaping.  At the same time he wants to do away with personal and business state income tax in a move he states is “revenue neutral.”  Supposedly it is a way to boost economic development and to give businesses and families more stability and control over how and when they pay taxes.  But does it truly do what he says or is it just another hit at the 47% of people that he and his party don’t care about, and rewarding high income citizens and businesses that back him?  All you have to do is “run the numbers” to prove his plan is not what he says. 

First take a family with a net taxable income of $40,000 and pays a state income tax of $1,100.  If we assume this family will spend 80% of their income on taxable retail purchases, they will pay $2,000 with the 6.25% sales tax.  This means they will sustain a net loss of $900 switching from state income tax to retail sales tax.  Of course if you figure just the increase in sales tax (2.25%) there is a small gain of $380. 

Now take a family with a net taxable income of $200,000 and pays a state income tax of $11,500.  If we assume this family will spend 70% of their income on taxable retail purchases, they will pay $8,750 with the 6.25% sales tax.  They will realize a net savings of $4,250 switching from state income tax to retail sales tax.  But if you figure just the increase in sales tax (2.25%) this family pays $3,150 additional sales tax and has a whopping net savings of   $8,350.  And if they spend a lower percentage at retail and either save or invest more, their net gain is even greater.   

Once again, the rich get richer at the expense of the poor and middle class. Businesses and large corporations would now pay no income tax on profits at all.  That would leave them more money available to back political candidates like Gov. Jindal. 

In addition to this, a nonpartisan analysis out last week by the Public Affairs Research Council of Louisiana states that Jindal’s plan is not revenue neutral but rather comes up $650 million short. 

The sad part is we see and hear nothing from the media on numbers such as this.