NEW ORLEANS (Reuters) - Louisiana lawmakers on Tuesday questioned the wisdom of eliminating the state’s income tax without raising sales taxes, one day after Governor Bobby Jindal said he would delay his plan to scrap the income tax.
Jindal, a possible 2016 Republican presidential candidate, shelved his package on the two-month legislative session’s opening day on Monday, acknowledging that widespread public discomfort doomed its chances.
Instead he called on lawmakers to pass their own plan and “send me a bill to get rid of these taxes.”
His plan would have eliminated all state personal and corporate income taxes. It also called for a 56 percent increase in the state sales tax, a much higher cigarette tax, and the elimination of some tax loopholes to make up the $3 billion shortfall from abolishing the income taxes.
The question of whether to cut income taxes without raising the sales tax dominated the legislative debate on Tuesday. Another idea being floated was getting rid of the taxes over time instead of all at once.
At a Senate hearing, Republican Senator Robert Adley asked Department of Revenue Executive Counsel Tim Barfield whether an income tax repeal would still need to be revenue-neutral to pass muster with the governor.
“I think that would be the ultimate desire,” Barfield said. “But I think if you look at a long-term phase-out of that (income tax), I think you have a lot more leeway.”
Jindal’s package, designed to make Louisiana more competitive with nearby income tax-free states such as Florida and Texas, would have seen the sales tax top 11 percent in some localities, the highest in the nation, when combined with local taxes.
Simply eliminating the income tax could be an easier sell than pursuing tax hikes to make up for the lost revenue. For one thing, it would not require a two-thirds vote of each chamber of the legislature.
But watchdog groups warned lawmakers against going ahead with a big tax cut on the fly.
“Pursuing a 10-year phase-out of the income tax while trying to find offsets that even the governor couldn’t find would be a daunting task at best and of great potential risk to the state at worst,” the Council for a Better Louisiana said in a statement. “And simply phasing out the income tax without offsets would be irresponsible.”
Representative Joel Robideaux, the Republican Ways and Means chairman who was the sponsor of Jindal’s plan, also has weighed in on the side of finding offsets.
House Democratic Caucus Chair John Bel Edwards accused Jindal of being more worried about building a record for a possible presidential run than addressing Louisiana’s needs.
“The governor is looking to court folks outside of Louisiana instead of addressing the concerns we have here,” Edwards said. “Until we can adequately fund our priorities, we should not even begin to discuss dismantling our tax system.”
Editing by Corrie MacLaggan and Xavier Briand