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La. gov seeking to raise sales tax to 6.25 percent

Melinda Deslatte, Associated Press

BATON ROUGE, La. (AP) -- Gov. Bobby Jindal will seek to boost Louisiana sales taxes even higher than previously discussed to help cover the costs of eliminating state income taxes, his office announced Thursday.

Jindal's proposal would increase the state sales tax from 4 percent to 6.25 percent, rather than the 5.88 percent earlier outlined to lawmakers. That higher tax rate also would be charged on previously untaxed services, like haircuts, cable TV, museum visits, accounting services and landscaping.

The dollars generated by the sales tax hike would be used to help offset the revenue loss from eliminating the state's personal and business income taxes, as Jindal has proposed. He describes the proposal as a way to boost economic development and to give businesses and families more stability and control over how and when they pay taxes.

Lawmakers will consider the tax swap in the legislative session that begins April 8.

Officials say the Republican governor's goal is to keep the entire tax rewrite "revenue neutral," so that the state doesn't lose or gain money. Eliminating the income taxes would create a $3 billion hole.

A nonpartisan analysis last week by the Public Affairs Research Council of Louisiana suggested the mix of tax hikes that Jindal had previously proposed to offset the income tax loss could be as much as $650 million short of revenue neutrality.

"This has been and will continue to be a collaborative process. We have been working with the Public Affairs Research Council, the Legislative Fiscal Office, various industry stakeholders and legislators to ensure that we are using the best data available to meet our goal of revenue neutrality as well as our goal of ensuring that families at every income level will be better off," Tim Barfield, Jindal's leader on the tax rewrite, said in a statement.

Last week, when PAR's analysis was released, Barfield called it flawed, saying its "assumptions are erroneous."

A Department of Revenue spokesman didn't immediately respond to questions about how much of a gap was addressed by the change in the sales tax increase proposal.

Many legislators had expressed worry about the proposed 5.88 percent sales tax rate. Already the lower sales tax hike would have pushed Louisiana's average local and state sales tax rate to the highest in the nation.

Critics have said the governor's tax swap proposal would shift a greater cost share of government operations to the poor and middle class.

The Jindal administration says nearly all households would benefit and about $500 million in tax costs would be shifted to businesses. It was unclear Thursday if those figures would change under the proposed 6.25 percent sales tax rate.

"We are filing a tax reform package that will make Louisiana a better place to do business, create more opportunities for Louisianans and let families have more control over their own money," Barfield said in his statement.

The state's leading business lobbying group, the Louisiana Association of Business and Industry, announced its opposition this week to the tax swap proposal, calling it bad for companies.