Jindal’s new revenue plan: impose crushing tax increases on the poor

By Robert Mann

Hasn’t Louisiana Gov. Bobby Jindal done enough to hurt his state’s poor citizens?

After virtually destroying the public health care system, why would he want to deepen their anguish by increasing taxes on them by as much as 75 percent?

Tax
(Photo credit: 401(K) 2013)

That could be the practical impact of a new tax plan, announced today, that Jindal is prepared to submit to the Louisiana Legislature — eliminating the most progressive tax, the income tax, and making up much of the difference by raising the state’s sales tax (by a whopping 75 percent) from 4 cents to 7 cents.

Jindal also plans to eliminate the state’s corporate tax and raise additional revenue by eliminating unspecified tax exemptions.

Until we see the exact details of his proposal, perhaps we should give Jindal the benefit of the doubt. Perhaps he has a way to exempt poor people from paying the increased sales taxes or there is a plan for an annual refund of those additional taxes on people at or below the poverty (not ideal, but better than nothing).

But absent any ameliorating provision, giving middle-income and wealthy taxpayers a 100 percent income tax cut would be a fantastic boon to those better-off taxpayers and a giant, punishing tax increase on the poor.

Some will argue, of course, that it’s the ultimate in tax fairness — under a flat sales tax plan everyone pays the same rate. Perhaps rich and poor all pay the same rate, but they certainly will not be paying the same percentage of their incomes in state taxes under the Jindal plan.

And that’s what potentially makes Jindal’s plan so cruel and unfair to poor families.

Here’s what I mean: poor families spend the vast majority of their income on necessities, that is, purchases subject to sales taxes. In Louisiana, according to a recent study by the Corporation for Enterprise Development, poor families pay an average of 10.4 percent of their income in local and state taxes, mostly sales taxes. A 75 percent increase in their sales taxes would be devastating to many of those families.

Take, on the other hand, the top 1 percent of taxpayers, who pay only 5.2 percent of their income in state and local taxes, half the rate of the poor. Those wealthy families pay a far smaller percentage of their income in sales taxes (they don’t spend nearly the same percentage of income as the poor on necessities). That means an increased sales tax, even one that increases sales taxes by 75 percent, will only touch a small portion of their income.

But Louisiana levees an income tax on almost all of their earnings – six percent of every dollar earned by a family over $100,000 (for single earners, the six percent rate kicks in on income over $50,000).

For a family with income of $500,000, that’s about a $24,000 income tax break, which is only slightly offset by a very modest increase in sales taxes.

A boon for wealthy taxpayers and punishing tax on the poor.

Is that the kind of state we wish to become? According to the U.S. Census Bureau, our state’s average family income is $23,853.

So, Jindal is essentially proposing a large tax increase on average Louisiana families, while giving a huge tax break to wealthy families and corporations.

Jindal may like to promote himself as a strong anti-tax governor, but this plan reveals him to be someone just prefers raising taxes on the poor.

Addendum: Those wanting to learn more about the implications of state and local tax policy on the poor should read this important article by University of Alabama law professor Susan Pace Hammill.

Postscript: Jindal’s Revenue secretary said Thursday night that Jindal would, indeed, work to mitigate the impact of the sales tax increases on the poor. While it doesn’t change the basic regressive nature of Jindal’s plan, it’s better than nothing. Still, this plan is a massive boon to the rich.

Another postscript: This proposal keeps changing by the minute. It certainly looks like Jindal’s plan to mitigate the sales tax hike is a half-baked afterthought.

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9 thoughts on “Jindal’s new revenue plan: impose crushing tax increases on the poor

  1. I’m surprised they didn’t include an increase in property taxes to boot, but they may have calculated a push back from agriculture. In Texas, the high property taxes levied in lieu of an income taxes is punishing to the cash poor. Would not surprise me one bit if the property tax increase will be a negotiation point. Wonder what the high sales tax will do to the tourism industry? (This certainly explains why Revenue will be laying off its tax appeals section and possibly its tax form scanning section as well as shutting down all its regional offices. )

  2. I’ve never been what you would call a political activist before but this time the LBW (Little Brown Weasel) has gone too far. This ALEC brainchild has got to be stopped.

  3. Sales taxes are the ONLY equitable taxes. To your point about “unfairness”, the fair comes in October.

  4. Have you heard that he is also proposing eliminating the severance tax on oil and gas? (as per Reps. Walt Leger and Joe Harrison—I got Leger’s comments second hand but I interviewed Joe Harrison.)

    • That’s not been in any of the stories I’ve seen today, Tom. But it would be consistent with a plan that’s designed to shovel huge piles of money to the wealthy.

  5. [...] Baton Rouge political blogger Bob Mann, who worked for three U.S. senators and former Gov. Kathleen Blanco and who now holds the Manship Chair at the Manship School of Mass Communication at LSU and who is also director of the school’s Reilly Center for Media & Public Affairs, perhaps said it best on his blog Something Like the Truth on Thursday http://bobmannblog.com/2013/01/10/jindals-new-revenue-plan-impose-crushing-tax-increases-on-the-poor…: [...]

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