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Governor Jindal's Bold New Tax Plan (By the numbers)
Tax Foundation ^ | 01/21/2013 | Scott Drenkard

Posted on 01/21/2013 5:44:54 AM PST by SeekAndFind

I’ve spent a better part of my day today answering media queries about Louisiana Gov. Jindal’s new tax plan, which is detailed here. His goal is to eliminate the corporate income tax, the individual income tax, and the franchise tax. Details are still a bit scant, but according to initial reports and some conversations I’ve had with people on the ground in Louisiana over the past few weeks, the plan is to pay for this tax elimination by expanding the sales tax base to services and raising the rate on that tax. We’ll be issuing more analysis on this in the coming days, but I wanted to get a few thoughts out quickly and show how these changes would affect Louisiana’s score in the State Business Tax Climate Index. Bear in mind that these numbers are preliminary, and as we get more details, we’ll be tweaking our formula to incorporate them. For now though, all told, the changes would bounce Louisiana from 32nd to 4th overall on our list of tax structures (assuming the changes were in place as of July 1, 2012).

Table 1: Louisiana Business Climate Under Governor Jindal's Plan

Current Rank Jindal's Plan
Overall 32 4
Corporate 18 1
Individual 25 1
Sales 49 50
UIT 4 4
Property 23 7

This plan is a step in the right direction. Corporate and individual income taxes are generally considered the most destructive taxes to economic growth, and both have a great deal of complexity and compliance costs associated with them. Elimination yields a perfect score in those components of the Index.

The expansion of the sales tax base to services is probably one of the more groundbreaking components of this plan, and I’m hopeful that lawmakers in Louisiana will do it right. An ideal, neutral sales tax would tax all final sales at one rate and exempt all business inputs. For an explanation of this concept, click here.

This Index simulation in the sales tax component is actually a conservative one, because 1) I assume that the sales tax will increase to 7 percent, which is the stated maximum that the rate might go and 2) I assume that some of the problems with Louisiana’s sales tax base will not be addressed. I do this because we haven’t gotten the full details yet, so the sales tax score (and overall score for that matter) may improve if policymakers bring the rate down further or address some of those base problems.

Finally, Jindal’s plan would eliminate the franchise (or “capital stock”) tax, eliminating bad incentives toward accumulating addition capital and growing companies. This improves their property tax score greatly in this component, from 23rd to 7th.

We’ll be following this plan closely.

For more on Louisiana, click here.

TOPICS: Business/Economy; Culture/Society; Government; US: Louisiana
KEYWORDS: jindal; louisiana; taxes

1 posted on 01/21/2013 5:45:05 AM PST by SeekAndFind
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To: SeekAndFind

Creating the antecedents for a 2016 run? “Obama raised your taxes and retarded oil and gas drilling on federal lands, the economy has stagnated nationally. I cut taxes in Louisiana, encouraged oil and gas drilling, and we’re booming. Take your pick.”

2 posted on 01/21/2013 5:57:54 AM PST by sitetest (If Roe is not overturned, no unborn child will ever be protected in law.)
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To: sitetest

We like Jindal here in Louisiana.

Great plans . Take away the marxist state income tax. works for me.

Hope he does run for pres in 2016

3 posted on 01/21/2013 6:15:28 AM PST by Democrat_media (media makes mass shooters household names to create more & take our guns)
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To: SeekAndFind

Jindal is such a RINO(sarc)

4 posted on 01/21/2013 6:24:44 AM PST by BBell (And Now for Something Completely Different)
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To: SeekAndFind

Doesn’t matter how this would help LA and other states, the liberals all say “it’s not fair to the children of poor people” (remember, always use the kids as props) because parents have to spend more of their income.

5 posted on 01/21/2013 7:03:31 AM PST by radioone
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