With dueling budgets being introduced on Capitol Hill this week, the possibility of tax reform is the talk of Washington. As we predicted before last November’s elections, tax reform will be on the agenda in 2013 – but has its best chances in the states. We are seeing that demonstrated Thursday by Louisiana’s Republican governor, Bobby Jindal.
Jindal unveiled what could be, if approved by the legislature, the boldest, most pro-growth state tax reform in U.S. history. His plan, outlined in Baton Rouge this morning during a joint meeting of the House Ways and Means Committee and the Senate Revenue and Fiscal Affairs Committee, calls for the elimination of all state personal and corporate income taxes, as well as the state franchise tax on capital stock. This would be replaced by an increase in the state sales tax rate to 5.88 percent, up from 4 percent. The sales tax would also apply to a broader base of goods and a number of services previously untaxed.
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.