Commentary provided by Jan Moller, Director of the Louisiana Budget Project in Baton Rouge, LA.
Louisiana is a conservative state with a very conservative governor who, until recently, was one of the most popular in the country.
But when Gov. Bobby Jindal unveiled a “revenue neutral” plan to eliminate Louisiana’s individual and corporate income taxes this year, something extraordinary happened: the people of Louisiana stood up, and the governor backed down. Less than three months after the plan was announced, the governor admitted defeat and said he was “parking” his package of bills. A week later, the chairman of the House tax-writing committee said any efforts to scrap the income tax were dead for the year.
The governor’s plan – coming at a time when state government faced a $1.3 billion shortfall after five straight years of cuts to basic services – failed for a simple reason: Eliminating income taxes and making up the lost revenue with other taxes meant shifting the tax burden from the wealthiest individuals and corporations to low- and middle-income families and companies.
One analysis found that the poorest 60 percent of Louisiana households would have paid higher taxes. Had the plan passed, Louisiana’s overall sales tax rate would have been the highest in the country. This would have disproportionately hurt the poor and middle class, who would have paid more for everything from clothes and car repairs to haircuts and appliances.
Making matters worse, the numbers in the governor’s plan did not add up. The administration’s estimates for the money that would be lost by getting rid of the income tax were too low (they were based on 2011 figures, when the economy was still in recession), while the estimates for how much would be raised through higher cigarette taxes and scaled-back tax breaks were too high.
As these facts became clear, the plan came under increased attack. Religious leaders rallied against its effects on the poor, while the state’s most powerful business group assailed it for raising taxes on businesses by $500 million a year. One poll found just 17 percent support for the plan.
Whatever support existed within the Legislature quickly waned, as elected officials said they would rather focus on the state’s ongoing budget problems.
By the time the plan was taken off life support, a governor who was re-elected in 2011 with 66 percent of the vote had seen his approval ratings crater to new lows.