Jindal’s Tax Plan

Why Big Business Loves It, But Some Small Businesses Hate It
BATON ROUGE — Gov. Bobby Jindal is proposing a massive overhaul of Louisiana’s tax system for introduction in the April 8 regular session of the Louisiana Legislature.  Jindal’s plan, which he said is still evolving, includes:
•    Repeal of the state income tax on individuals and corporations
•    Raising the state portion of the sales tax from 4.0 to 5.88 percent (raising the total sales tax in East Baton Rouge from 9.0 to 10.88)
•    Imposing an all-new tax on professional services, business services, and personal services at the rate of 5.88 percent
•    Tripling of the cigarette tax
Repealing the state corporate income tax would make the state attractive to out-of-state corporations, but very few Louisiana businesses pay corporate income taxes.  Since the legislature created the LLC (limited liability company) in the 1990’s, most businesses in the state operate as LLC’s and are not subject to corporate income taxes. Today one percent of the state’s businesses pay 90 percent of the corporate taxes in the state.
Prof. Jeff Sadow of LSU Shreveport writes on Louisiana politics and economic issues.  Sadow said he thinks the plan would be good for Louisiana in the long run, but “there will be winners and losers.”
If you are one of the losers, you might not like the plan, he said, but in the long run everyone will benefit.  He said eliminating income taxes would bring major corporation to invest in Louisiana and help the economy.
State Rep. Cameron Henry (R-Metairie) is one of the legislators raising questions about the plan.  On Wednesday, he said, “The big picture is that repealing the income tax is a great tag line.  But we have to look at the details to see how to accomplish it.  I’d like this to be a tax break for business — not a tax increase!”
Henry said the effect of the plan on small business could be severe.  “We’re talking about going from zero to 5.88 percent on gross revenues for many businesses.  But I’m afraid it’s really much worse than that for several reasons.”
Henry cited three concerns:
•    Local governments could add on to the new professional, business, and personal services tax and increase it up to the level of other sales taxes — 10.88 percent in the case of most of East Baton Rouge.
•    Jindal’s proposed Internet tax that would attempt to establish a uniform statewide tax base and then subject all Internet purchases to the new tax.
•    The governor’s proposed new Tax Court, which would be composed of three judges, each elected from one-third of the state.  These judges, rather than district court judges, would hear tax cases.
Henry said, “The new tax would present a dilemma for small business.  Could they pass the tax along?  And who would they pass it to?  In this economy, a lot of businesses would have to eat the tax increase,
but I’m not sure they could.”