Louisiana Gov. Bobby Jindal (R) introduced a plan today that would axe the state’s corporate and personal income taxes, replacing them instead with an increase in the sales tax. Jindal had promised the total elimination of income taxes during his State of the State address in January, and despite studies showing that it such a change would directly benefit the rich at the expense of the poor, he has followed through on the plan.
Jindal said his tax reform would be revenue neutral, and the sales tax would be increased to 5.88 percent. Louisianans would still pay their local sales taxes as well, meaning some residents would face double-digit sales tax rates after Jindal’s reform, the New Orleans Times-Picayune reports:
The planned increase in the sales tax would raise the current rate by about 47 percent and would come on top of local sales taxes. Residents in New Orleans, for example, would pay a combined rate of about 11 percent under the plan.
Louisiana already has one of the highest combined average state and local sales tax rate in the country and the increase would put the state at the top of that list, according to information from The Tax Foundation.
The poorest Louisianans already pay more of their income in taxes than the richest, according to a study from the Institute on Taxation and Economic Policy that shows the bottom 20 percent of the state’s residents pay 10.6 percent of their income in taxes compared to just 4.6 percent for the top 1 percent of residents. Jindal’s plan would only skew the tax code further against the poor and middle class, since it would grant tax cuts to the rich while raising taxes on 80 percent of the state’s residents, according to ITEP.
Jindal said today that he would offset the increases some residents would face by providing rebates, but when ITEP conducted its preliminary study of his plan in January, it found that “any low income tax relief will likely be insufficient to offset the impact of the large sales tax hike necessary to make this tax swap revenue neutral.” Jindal isn’t the only Republican governor pushing such a plan. Republican governors in Nebraska and Kansas and the state legislature in North Carolina are also considering replacing income taxes with increased sales taxes.