A proposal backed by Gov. Bobby Jindal (R-Louisiana) to abolish the state income tax on individuals and on corporations would amount to a tax hike for 80% of Louisianans that would hit working families and the poor especially hard, according to an analysis prepared by the non-partisan Institute on Taxation and Economic Policy (ITEP).

Jindal, considered by many as a potential candidate for the GOP presidential nomination in 2016, has said he wants to abolish Louisiana’s income taxes altogether, but critics question how he would replace the $3 billion that flows into state coffers annually from income tax receipts. Although Jindal has indicated that he wants to raise sales taxes, impose taxes on some services, and eliminate some sales tax exemptions, he has ruled out imposing a state property tax or re-imposing sales taxes on groceries, prescriptions and home utility bills. Aides have indicated that details will not be forthcoming until shortly before the state legislature meets in April.

Into the breach steps ITEP, which in the absence of details from Jindal based its analysis on the simplest course open to Jindal, a straight sales tax increase, which news reports suggest he favors. But Louisiana already has the country’s third-highest sales tax rate, at an average of 8.85%. The state sales tax is 4% and local governments tack on an additional 4.45% on average. In New Orleans, the combined sales tax rate is 9%.

Contrary to Jindal’s Revenue Department, which has released a statement arguing that higher sales taxes are preferable to higher income taxes because sales taxes would promote investment and create jobs, the ITEP analysis emphasizes the dramatically regressive nature of the Jindal plan.

ITEP concluded that the “overall shift in tax liability is so dramatic that the plan is virtually guaranteed to have a regressive impact regardless of whether or not a low-income relief program is added to the package.” Specifically, ITEP found that the bottom 80% of Louisianans in income would see a tax increase. The poorest 20% of taxpayers, with an average income of $12,000, would see an average tax increase of $395; the middle 20%, with an average income of $43,000, would see an increase of $534; while the largest beneficiaries would be the top 1%, with an average income of more than $1 million, who'd see an average tax cut of $25,423.

-Matt Bewig

To Learn More:

Few Details so far on how Jindal would Pay for Income Tax cut (by Tyler Bridges, The Lens)

Governor Jindal’s Bad Idea for Louisiana Attracts Scrutiny (Citizens for Tax Justice)

Proposal to Eliminate Income Taxes Amounts to a Tax Increase on Bottom 80 Percent of Louisianans (Institute on Taxation and Economic Policy) (pdf)