Governor Bobby Jindal addressed the annual Governor's West Bank Luncheon today in the New Orleans area where he continued to make the case for his plan to eliminate income taxes, abolish over 200 special interest tax loopholes and make Louisiana's tax code simpler and fairer for Louisiana families and businesses.
Governor Jindal stressed that while Louisiana's economy is outperforming the southern and national economies, there are too many Louisianians that are unemployed, underemployed or that have left the state to find work. The Governor said that a major obstacle to helping more Louisianians find work and growing the economy is Louisiana's tax code, which he called complex, unstable and unfair.
Governor Jindal said, "Our tax code is complex, unstable and unfair. If you have a lobbyist and a lawyer, you can find a loophole in the tax code. Families don't have lobbyists in Baton Rouge and they aren't getting a fair shake in the current system. We need a system where special interest groups are no longer able to rig the system. The tax code is riddled with exemptions and overly complex, which is hurting our ability to get more business investment and create more jobs for our people.
"That's why my top priority is to overhaul the tax code by eliminating income taxes and loopholes. Eliminating income taxes will make Louisiana the best place for businesses to invest and create jobs, and give Louisianians more control over their own money. Closing loopholes will also ensure that everyone pays their fair share, but not more than that. The bottom line is that for too long we've talked about eliminating income taxes in order to compete with Texas and Florida, but we've always just tinkered around the edge of major reform. This is our opportunity to finally eliminate the income tax and generate major job growth and opportunity for our sons and daughters."
Governor Jindal said eliminating income taxes and loopholes would have six benefits, including:
Eliminating income taxes would make Louisiana the best place to start a business. A new study shows that eliminating income taxes would boost business investment in Louisiana by more than $180 million and create nearly 12,000 new jobs on top of the jobs that are already forecasted to be created.
Eliminating income taxes will give more control to the taxpayer. Taxing what people spend instead of what they earn gives taxpayers more control over their own money.
A study showed that eliminating income taxes would increase disposable income nearly $1.8 billion - or more than $900 extra for each Louisiana household.
By overhauling the tax code and eliminating income taxes and loopholes, everyone will pay their fair share, but no more than that.
Loopholes will be closed so powerful special interest groups will no longer be able to rig the system.
Food, prescription drugs and utilities will be protected from increased sales taxes.
Switching to a sales tax base will bring more stability in funding for government services.
The Governor also took on critics of his tax reform proposal -- who he said were defending the current system that allows special interests to rig the system. Governor Jindal debunked the following five myths that opponents have spread:
Myth #1 -- Governor Jindal's plan will raise taxes on low-income and middle-class Louisianians.
Fact: Eliminating income taxes and closing loopholes will reduce the tax burden for individuals and families across every income level.
For instance, a teacher making $45,000 per year would see her annual state tax burden reduced by about $680.
An employee at a landscaping company and a stay-at-home mom making a total of about $35,000 per year would see their annual state tax burden reduced by about $130.
A plant worker making $60,000 per year would see his annual state tax burden reduced by around $950.
A couple who owns a small business making about $90,000 per year would see their annual state tax burden reduced by about $1,450.
Governor Jindal said, "The bottom line is that eliminating income taxes will put your money back into your hands so you can spend it how you want."
Myth #2 -- Eliminating income taxes will hurt government revenue and force future budget cuts
Fact: Eliminating loopholes and switching to a sales tax base will bring more stability in funding for government services.
A leading cause of uncertainty and volatility in the revenue estimating process is the impact of more than 460 tax exemptions, some of which radically change in value from year to year.
Switching to a sales tax base will bring more stability in funding for government services. Currently, three states -- Nevada, South Dakota and Wyoming -- have no personal or corporate income tax rate, and they are all running budget surpluses.
The Governor said, "Switching to a more stable tax base will help smooth out many of the rough edges and stabilize state budgeting, and stability in government attracts businesses and creates good jobs."
Myth #3 -- The current tax structure is working and Louisiana has a low tax burden
Fact: Louisiana ranks near the bottom of many lists in terms of simplicity, fairness and stability.
The Governor noted that while the more than two-decade out-migration problem has been reversed, the tax code in Louisiana is playing a role in losing people.
Between 1995 and 2010, IRS data reveals a significant migration in the nation's population to certain areas of the country. During this period of time, $2 trillion transferred around the country to new population areas. In that same time period, Louisiana lost over $6 billion in adjusted gross income to other states.
Governor Jindal said, "People are mobile, and they can move -- and they will move -- to find new jobs and opportunities for their families. This is exactly why states with no income taxes are outperforming other states in terms of economic growth and population growth."
The Governor noted that over the last 10 years, more than 60 percent of the three million new jobs in America were created by the nine states without an income tax, and, over the past decade, states without income taxes have seen nearly 60 percent higher population growth than the national average.
Myth #4 -- Eliminating income taxes will hurt retirees and poor people.
Fact: Governor Jindal's plan protects low-income families, retirees, active duty military members who pay little or no income tax currently by creating the Family Assistance Rebate Program and the Assistance for Retiree and Military Rebate Program.
The Family Assistance Rebate Program compensates low income households based on the impact of the increased sales tax over any benefit from the reduction of income taxes.
The Assistance for Retiree and Military Rebate Program was designed to ensure that retirees, active duty military and other recipients of exempt income receive a net benefit under the tax reform proposal.
The plan also protects food, prescription drugs and utilities from increased sales taxes.
Governor Jindal said, "These provisions ensure retirees, low-income residents and families at all income levels will be better off."
Myth #5 -- If the states sales tax rate is increased, Louisiana's state sales tax rate will be one of the highest in the nation.
Fact: With the increased rate, Louisiana's state sales tax rate will be the 24th lowest in the nation and one of the lowest in the region.
The state sales tax rate will actually be one of the lowest in the region. Texas has a 6.25 percent state sales tax, Mississippi has a seven percent state sales tax and Arkansas has a six percent state sales tax.
Under the new system, Louisiana's state sales tax rate would be 24th lowest in the nation. The effective sales tax rate would be between 3.12 percent and 4.34 percent, with low-income earners on the lower end of the scale and high- income earners on the higher end of the scale.