Louisiana’s Republican state Treasurer recently complained about the budget plans of Louisiana’s Republican governor, Bobby Jindal, calling them “unrealistic and unbalanced.”
That’s true, but Jindal’s working on it. We talked two months ago about the ambitious governor’s plan to eliminate Louisiana’s income taxes and corporate taxes, replacing them with a hefty new sales tax. Jindal promised, at the time, that he’d keep this new sales tax “as low and flat as possible.”
What, specifically, does that mean? Now we know.
Gov. Bobby Jindal on Thursday proposed a hefty jump in the state’s sales tax rate and $1 billion in new taxes charged on services to help offset the cost of his push to eliminate Louisiana’s income taxes.
The Republican governor and his leader on the tax code revamp, Tim Barfield, outlined the first specifics of Jindal’s proposal to rewrite Louisiana’s tax code.
Jindal wants to boost state sales taxes from 4 percent to 5.88 percent; increase cigarette taxes from 36 cents per pack to $1.41; and assess sales taxes on a wide range of services not currently taxed.
Like what? Well, it’s a rather long list, which includes new taxes applied to everything from haircuts to veterinarian appointments to photographers.
Note, the entire plan is intended to be revenue neutral — Jindal doesn’t want higher sales taxes to close a budget shortfall; he wants higher sales taxes so that he can eliminate income and corporate taxes altogether. In other words, every dollar in new revenue is intended to replace every dollar in lost revenue.
And what’s the point of this? Apparently, Jindal wants to be able to say he scrapped Louisiana’s income taxes.
This is a very bad idea.
The thing to keep in mind when evaluating a policy like this is understanding who wins and who loses under the proposed change.
Michael Kinsley wrote a piece several years ago. “It’s a zero-sum game: Every dollar someone’s taxes go down is a dollar someone else’s go up. What you spend every year is the amount you earn minus the amount you save. On average, Americans save practically nothing, but wealthier people save more. Very poor people actually spend more than they earn, while Bill Gates and Warren Buffett couldn’t spend more than a small fraction of their income if they tried.”
Rachel explained this in more detail on the show several weeks ago: “A sales tax doesn’t care if you’re a janitor with four kids in one precious dollar, or if you are a cardiologist with the second home and lots of dollars. “And because of that, the less you make, the greater percentage of income you pay when you pay the sales tax. If you don’t make that much money, that sales tax on the egg might be 1 percent of a day’s pay for you. It could probably be more like a thousandth of a percent of the cardiologist’s paycheck for the day. “A sales tax is therefore among the least populist ways of raising money for government, proportionally speaking. It takes the most from people with the least money, and the least from everybody who has more money.” In Louisiana, Rachel added, this means the folks “who can least afford a tax hike will get the biggest tax hike.” This is unambiguously true. If income taxes are scrapped in the state altogether, it would necessarily mean a huge break for the very wealthy, while lower-income people in the state would have to pay more on everything they buy. It’s anti-populism, plain and simple.
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