President Obama and the Democrats have been talking a big game about closing loopholes on “the wealthy,” “big oil companies,” “corporate jet owners” and all manner of greedy societal bottom-feeders (or something) as an ostensible method of (ever-so-slightly) reducing our budget deficit, and it isn’t that Republicans are so very opposed to the idea of closing tax loopholes — but they need to come as part of an at least revenue-neutral effort to simplify the tax code and lower overall tax rates. Otherwise, it’s just a fancy and deceptive way of saying, hey, let’s hike taxes to try and bring in still more revenue for our big-government agenda!
In the unlikelihood of lower across-the-board taxes happening on the federal level anytime soon, several states have been promising to take federalism by the horns and lead by example with tax-code simplification, and Louisiana Gov. Bobby Jindal unveiled his specific plan to create and more pro-growth and business-friendly climate in his state on Thursday.
The proposal will create a simplified tax system to accelerate job creation and business growth in Louisiana. Despite one of the lowest state/local tax burdens in the country, Louisiana’s tax structure often is poorly perceived because of its complexity. By levying nearly all major tax types including personal and corporate income taxes, Louisiana’s current tax climate results in competitive disadvantages for businesses and individuals by penalizing hard work and increased earnings.
The plan will transform Louisiana’s tax system into a model that is simple, stable, and modern. The plan will eliminate two major tax types: personal income tax and corporate income and franchise tax. Eliminating income taxes in a revenue-neutral manner and improving sales tax administration will dramatically simplify Louisiana’s tax system and reduce administrative problems for families and small businesses. The effective start date of the program is January 1, 2014.
The plan will ensure revenue neutrality by:
-Eliminating~$2.7 Billion in personal income tax and corporate income and franchise tax
-Eliminating over 200 exemptions, resulting in $114 Million in additional revenue
-Broadening the state sales tax base and raising the state rate to 5.88%, which will result in ~$2.1 billion in revenue
-Maintaining vital local tax offsets and business competitiveness incentives
-Implementing targeted tax offsets, including a change in the cigarette tax rate, and tightening severance tax exemptions
In a nutshell, it’s an elimination of all personal income and corporate income taxes, plus the state franchise tax on capital stock and a bunch of exemptions, in exchange for an increase in the state sales tax from 4 percent to 5.88 percent. It’s more simple, more efficient, and Americans for Tax Reform is a big fan:
Jindal unveiled what could be, if approved by the legislature, the boldest, most pro-growth state tax reform in U.S. history. …
Many governors around the country have proposed rate-reducing tax reform, but Jindal’s plan sets a gold standard for pro-growth reform. His proposal could mean more disposable income for families while increasing the job-creating capacity of employers across the Pelican State.
It would also make Louisiana’s tax code more conducive to economic growth. A recent Organization for Economic Cooperation and Development report ranked taxes according to their negative economic impact. The study concluded that taxes on income and capital, which Jindal’s plan would eliminate, were the most damaging.
Louisiana ranked 32nd on the nonpartisan Tax Foundation’s 2013 State Business Tax Climate Index. If Jindal’s plan is approved and signed into law, the state will jump to No. 4 on that index.
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