Gov. Bobby Jindal has punted the tax debate to lawmakers with no guiding principles for the multibillion-dollar budget implications involved in his bid to repeal Louisiana’s income tax.
Lawmakers talking for years of independence got their wish. They may not like the implications in a state struggling with years of budget crises and unpopular cuts to health care services and higher education.
If they agree to the repeal, legislators have to figure out how to make the budget balance and whether to raise other taxes to replace the lost income tax money – with Jindal taking the credit for the tax repeal idea.
If they don’t agree to the repeal, lawmakers will most certainly take the blame from the Republican governor who has made the income tax phase-out the major plank of his legislative agenda.
Jindal describes his method as giving the Legislature freedom to determine the best approach after lawmakers didn’t like the governor’s tax package.
Some lawmakers see opportunity, while others see a trap. Still others question why they’re even having the discussion at all amid the state’s ongoing budget woes.
The governor’s expressed one goal for taxes: repeal the state’s income tax, most importantly the personal income tax, though he’d like the corporate income and franchise taxes gone, too. He said the removal of income taxes would drive growth in the economy, through increased business development and increased personal wealth.
He’s giving lawmakers little direction on how to remove the tax, after his own proposal became so toxic that he ditched it.
He’s said he’d support a phase-out, rather than an all-at-once removal as he originally sought. And he doesn’t want lawmakers to raise more money with taxes than the state would have otherwise brought in under the current structure.
That’s about it for parameters.
“We don’t want to put up any obstacles,” Jindal told reporters pushing for more information about his position in a state where the governor traditionally holds heavy sway over legislative maneuvering.
Jindal described a myriad of ideas that lawmakers could generate: “At this point, my attitude’s, ‘Let a thousand flowers bloom.’”
The personal and corporate income taxes are estimated to bring in $3 billion this year, a figure that grows larger each year thereafter.
Jindal’s not requiring the income tax be replaced with new taxes to keep the state from losing money, though that was his initial proposal – and requirement – when he was pitching his own tax plan.
The governor had initially proposed to eliminate the income tax all at once in January 2014 and replace it with higher sales taxes charged on a list of previously untaxed services, along with the removal of dozens of tax breaks on the books.
The plan was so unpopular Jindal abandoned it on the opening day of the two-month legislative session and instead threw his support behind the general concept of an income tax phase-out.
To lawmakers he said, “Send me that bill to get rid of those taxes.”
So, Jindal’s thrown open the possibility that lawmakers could strip a revenue source that makes up one-third of the state’s general fund without replacing the lost dollars.
Legislative leaders have suggested they’d at least want to offset some of the revenue.
As Jindal found out when he ran into a wall of criticism with his proposal, deciding how to backfill a $3 billion hole isn’t easy.
Economists and nonpartisan groups have raised concerns that a state with steep budget cuts year after year can’t afford to lose the income tax. They’ve questioned why the repeal debate is even happening since Louisiana has one of the lowest tax burdens in the nation.
“Let’s take the reality check and end this unrealistic tax debate that’s distracting us from some of our more serious and imminent budget problems,” the Council for a Better Louisiana said in a statement.
The House Ways and Means Committee, the first stop for most of the tax bills, begins its income tax repeal discussion Monday.
EDITOR’S NOTE: Melinda Deslatte covers the Louisiana Capitol for The Associated Press.