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Joseph Henchman of the Tax Foundation on Governor Bobby Jindal’s proposal for a state tax overhaul.
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Louisiana governor Bobby Jindal proposing the elimination of all Louisiana personal income and corporate taxes that is right it would go to zero.
But there is a catch the trade -- might be higher sales tax -- work.
Joseph henchman is vice president of legal in the state projects for the state Tax Foundation and he advised governor Jim Millstein welcome to show.
-- what your what would your advice what was the impetus behind his plan.
What we put out a report every year our state business tax climate index were reevaluate how simple transparent.
Neutral and stable each state tax system is we go through over hundred different variables to rank the states on that.
Louisiana didn't come out very well came out in the thirties and that's -- the governor's office approached us to see what could they do didn't do to improve our ranking and they decided to go all the way tend be very ambitious plan if they were adopted all -- move into the top ten in terms of business friendly tax -- We wait let me let me stop you so they reached out humans have what -- we do to do better did you guys spends say back immediately well drop your corporate tax rate.
What we gave a law a range of different options from little things they can do to improve their tax system all the way to.
Dramatic changes in Louisiana.
Only they only get about 17% of their revenue from the individual income tax is a lot of money.
But a lot less than a lot of other states and they they have incredible tourism of course and in Louisiana they've got New Orleans.
And they're also looking to see how can they make themselves better and and we proposed.
To them and they and they really ran with the idea of just getting rid of the most destructive taxes to economic growth and investment is of the income taxes.
So if you look at the corporate tax rate and actually -- total revenue they came into the state it's actually pretty low.
They in 2010 his most recent data have 2010 -- 111 it was only a 198 million in Louisiana.
But they've they've personal income tax revenue was a whole lot higher from 2010 to 2011 it was 2.4.
Billion.
That's just a little bit lower than their total sales tax revenue right now sent to -- that seems like that's gonna be a lot of revenue to replace did you suggest to them.
That paid almost doubled the sales tax to make up that money or that date cut spending.
That's a great question.
We we went -- -- and then they're going out it was two fundamental points one in his.
It needs to be revenue neutral if they wanna cut spending that's great but we're gonna design that it's moving on do that -- the tax system if there -- Legislature knew that separately.
But the tax system that they'll be faced with this one that raises the same amount of revenue.
-- other ways to make sure that it doesn't really harm low income people on the way to do that is not just raising the sales tax rate that may be updating it.
Back in the days sales tax is only taxed goods -- that was the main part of our economy.
The reform that they're looking at and that other states are looking out is to broaden those two services that we may not be taxing right now.
See you want him to match hang on any -- we don't have much time you want them to match the revenue that's going to -- mosque.
From their income tax -- -- corporate tax dollar for dollar with sales tax revenue having no matter how you structure you see you're talking about taxing.
Services are things that higher income people depend on but it seems like no matter how you -- this is gonna end up being put your -- that.
Well it's not unprecedented there are a lot of states right now -- go without an individual income tax neighboring Texas Washington State.
Tennessee.
There's ways to make it work and and there's ways to design it to make sure that at the burden is not being borne by low income people.
Yet what was your sense from them about whether or not this is really gonna happen do you think it's politically feasible and that they have enough gusto behind it to make it happen we're looking -- other states right now.
Who have done the same things so let's not let the question Texas and Florida really jump out as places where people want to relocate and start a business do you think -- really do it.
Well there's a desire in Louisiana to change something about their tax system.
Right now in our global economy.
Investment and job creators and backing go anywhere in the world so -- -- Louisiana an easy answer the question why Louisiana and I think this'll make them stand out if they -- to implement.
Just imagine -- coming on.
Thank you.
Interesting.
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You know they look at -- -- investigate that further also is 75 the -- fifty.
