The Public Affairs Research Council of Louisiana says the plan relies on revenue figures from 2011 when the state was struggling with the recession, and the use of those figures appears to skew the data used to devise Jindal’s plan.
“As this discussion of tax reform begins, lawmakers, government leaders and staff, the media and the public must insist on objective and realistic assumptions about the costs and gains of each proposal on the table,” the government watchdog organization says.
Tim Barfield, the governor’s leader on the tax rewrite, disagreed with PAR’s analysis. He said the 2011 data was a starting point but not the only figures used to craft the plan.
Jindal proposes doing away with state personal and business income taxes. In exchange, he proposes to raise state sales taxes from 4 percent to 5.88 percent, to boost tobacco taxes, to charge sales taxes on more items and to eliminate dozens of tax breaks.
Lawmakers will consider the idea in the legislative session that begins April 8.
The Republican governor wants the state to not lose or gain money from the tax code revamp, saying his plan would be “revenue neutral.”
However, PAR says the use of 2011 figures makes it appear the Jindal administration needs less revenue than actually would be required to offset the elimination of state income taxes.
PAR’s analysis could heighten worries from Republican and Democratic lawmakers who said they are concerned that such a sweeping set of tax changes would create further budget troubles in a state that has struggled with shortfalls for five years.
Also, the organization’s analysis suggests Jindal and lawmakers would have to come up with higher sales tax increases, more tax break removals or other revenue-raising strategies to fill the gap in the governor’s plan to stay in balance.
Current income tax revenue projections for the state are higher than the dollars received in 2011. Also, severance tax breaks were particularly high two years ago, which could distort the expectations of savings by eliminating the tax breaks as part of the governor’s plan, PAR says.
The organization also says Jindal’s plan uses “an optimistic figure” for a $1.05 per-pack tax hike on cigarettes that assumes more revenue would be generated than is likely.
“The administration’s tax swap plan could be $500 million to $650 million short of being revenue neutral, assuming that all of the other figures in its cost/revenue list are close to being accurate,” the report says.
Barfield, executive counsel for the revenue department, said the organization’s assumptions were incorrect. He said the tax plan will be revenue neutral and the methodology has been reviewed by economic experts.
“PAR’s analysis does not take into account all the data used by the Louisiana Department of Revenue. We have always maintained that we used 2011 Fiscal Year data as a starting point for our analysis, but we have not stopped there,” Barfield said in a statement.
A one-page summary the revenue department provided to reporters and lawmakers with the release of the tax plan last week, however, included the 2011 figures to show how much income tax revenue would need to be offset.
The summary also included even larger expectations of what could be generated by the cigarette tax increase than the figure PAR cited as too optimistic.
By MELINDA DESLATTE