U.S. Markets close in 38 mins.

Jindal ditches tax swap proposal, so now what?

Melinda Deslatte, Associated Press

BATON ROUGE, La. (AP) -- Gov. Bobby Jindal's point person on tax issues indicated Tuesday that the governor is no longer seeking a dollar-for-dollar swap in repealing Louisiana's income tax, after ditching his own unpopular swap proposal.

If lawmakers agree to repeal the tax without offsetting the lost revenue, that could require continuing cuts across state programs and services annually to shrink government spending to a permanently lower tax base.

Tim Barfield, executive counsel for the state Department of Revenue, suggested to a Senate committee that now that Jindal is supporting a tax phase-out, the loss of the revenue doesn't have to be entirely offset.

The issue came up under questioning from Sen. Robert Adley, R-Benton. Adley said he assumed that even though Jindal shelved his own proposal, the governor would still want to make up for the lost income tax revenue to keep the entire tax change "revenue neutral."

"I think that would be the ultimate desire," Barfield replied. "But I think if you look at a long-term phase-out, you have a lot more leeway."

Jindal abandoned his tax package that would have immediately eliminated state income taxes in exchange for higher sales taxes on a new array of services because the proposal was widely criticized and appeared unlikely to pass.

The Republican governor instead is asking lawmakers to phase out the income tax over several years. He's provided no parameters. Jindal spokesman Sean Lansing added a slight caveat Tuesday, setting a priority list.

"The governor would like to eliminate personal income tax, corporate income tax and corporate franchise tax because it's been proven that doing so is the best way to grow the economy and create jobs. However, our absolute top priority is eliminating personal income tax," Lansing said.

Lawmakers and others are questioning how — and if — they'll offset the loss of $3 billion in tax revenue if they agree to repeal income taxes. That is becoming the new central tax debate of the two-month legislative session.

Democrats said lawmakers should shift their focus from discussions of tax repeal to crafting the state's nearly $25 billion annual operating budget and preserving critical services.

"We should not even begin to discuss dismantling our tax system, the income tax. We just shouldn't have that conversation. That shouldn't be our priority, not in the fifth year of budget cuts," said Rep. John Bel Edwards, D-Amite and chairman of the House Democratic Caucus.

He said Louisiana has the fourth-lowest tax burden in the country, according to the Tax Foundation, an organization regularly cited by Jindal.

The Legislature's black caucus had been floating an alternative tax rewrite plan to Jindal's, but it's unclear if the caucus will continue with that effort. Edwards said he doesn't think it needs to be pursued.

"We should be looking at the budget," said Rep. Walt Leger, D-New Orleans and the second-ranking member of the House. "We should be focused on higher education and health care."

Republicans appear mixed on how to proceed with the income tax repeal, with some GOP lawmakers saying the proposal needs to be paired with ways to fill the lost revenue, while others say the state needs to shrink spending instead.

"I don't believe we need to raise taxes to offset it," said Rep. Simone Champagne, R-Erath. "I'm a true believer that we still spend too much money in state government."

Republicans in the House issued a statement Tuesday pledging to take a "responsible, deliberative approach" in considering tax changes.

"There seems to be broad agreement that while an income tax repeal or phase-out is a desirable goal, it should be done in a responsible way that protects our core priorities," said Rep. Lance Harris, R-Alexandria, chairman of the House Republican Delegation.

Meanwhile, nonpartisan government watchdog groups are asking if lawmakers really have enough time to comb through tax ideas and study the implications of an income tax repeal in a two-month session.

The Council for A Better Louisiana urged lawmakers to "park" the entire tax overhaul effort this year, while the Public Affairs Research Council of Louisiana said the affordability and wisdom of an income tax repeal plan "still is a serious question."

"And the short session, already under way, leaves little time to invent and scrutinize a new, well-conceived plan," PAR wrote in an analysis, urging that any tax cuts be replaced with either identified spending cuts or new revenue.