Our View: Would ending state income tax help or hurt?

Published 7:43 am Wednesday, January 23, 2013

Gov. Bobby Jindal’s proposal’s to eliminate the state income tax and make up the difference by raising the state sales tax and doing away with some tax breaks has caused a seismic permutation in Louisiana’s political landscape.

This comes at a time when Jindal is under criticism for cuts in health care and education and what promises to be an acerbic session of the Legislature looming in April.

The lame-duck governor’s proposal is politically glitzy but one lacking in substance. By leaving the two most critical elements of the proposal — the amount of sales tax increases and what tax breaks will be deep-sixed — a mystery, Jindal appears to be employing a tactic so skillfully exploited by the Clinton administration and that is floating a trial balloon and then gauging the reaction before acting.

Politics aside, the proposal could have a crippling impact in southeast Louisiana, where the economy is embedded in the hospitality industry. Any increase in the state sales tax would likely result in higher hotel and restaurant taxes with the consumers ultimately bearing the cost.

Tourism officials are understandably concerned that higher room rates could result in fewer visitors and more empty seats at local restaurants.

Depending on what sales taxes Jindal decides to increase, other industries, notably real estate and transportation, could potentially sustain adverse trickle-down effects as consumers grapple with the idea of paying more for a home or a new car.

To be fair, Jindal’s proposal of eliminating the income tax is appealing. Only a handful of states have already done so, one being neighboring Texas and another Florida.

Jindal is betting, with good reason, that taxpayers have grown weary of large chunks of their hard-earned income being funneled into state coffers. It is a trend not indigenous to Louisiana but one that appears to be gaining traction nationwide.

The canon of Jindal’s proposal is sensible, but if the only option for eliminating the income tax is by potentially hindering the industry that sustains the entire region then the plan perhaps has a few flaws that need only to be tweaked.

Ironing out the differences will be the responsibility of the legislators, who hopefully will be directed by you, the voice of the people, through your input.

Jindal’s plan could be the catalyst for an exciting new era of economic growth in Louisiana. It could not come at a better time.