Government & Politics

If everyone wins, as Jindal claims, his tax plan math is bogus

Gov. Bobby Jindal says everyone wins under his plan to eliminate personal income and corporate taxes in Louisiana and jack up the state’s annual take from sales taxes.

He also insists the tax revamp will be “revenue-neutral,” meaning the state’s annual tax haul will neither rise nor fall.

“We have proposed a reform that will help families in every income level, that will cut taxes for families at every level, including retirees and the low-income,” Jindal said at the South Central Industrial Association in Houma on Tuesday, the start of a statewide round of barnstorming to sell the plan.

But like the IQ scores in Garrison Keillor’s Lake Wobegon — where “all the children are above average” — Jindal’s claims are mathematically impossible. 

By definition, a plan that is revenue neutral creates winners and losers, say two of the state’s leading economists.

“If you do the accounting correctly, not everyone can get a tax cut,” said Steven Sheffrin, a professor of economics at Tulane. “If you’re trying to raise the same amount of money as today, something has to give. Someone somewhere will have to pay more money. How can people in every income tax bracket get a tax cut? It doesn’t compute.”

The truth appears to be that businesses would pay more under the plan, as Tim Barfield, Jindal’s point man on taxes, acknowledged Monday. “It’s very clear that business will be taking more of this burden,” Barfield, executive counsel to the Revenue Department, told Times-Picayune. 

On Thursday, the Public Affairs Research Council, a Baton Rouge-based think tank, called for more information. “The losers in the tax swap deal need to be identified and the impact on them needs to be explained more fully,” wrote PAR. “Overall, there will be a shift of the tax burden from individuals to businesses, but that burden will not be evenly shared by all businesses.”

The administration has released a list of which industries would lose their sales-tax exemptions under his plan, as well as which activities would become subject to the 5.88 percent state sales tax that Jindal wants to impose (up from 4 percent today).

But the administration has provided that information only in a handout to state legislators that was made available to The Lens. The governor’s website has one fact sheet showing how all families would win under his tax plan. Another fact sheet shows a tax cut for a teacher earning $45,000 per year and a plant worker making $60,000. But the governor’s website does not show which businesses would lose exemptions or which would be hit with a sales tax for the first time.

Similarly, the Louisiana Department of Revenue provides a link to how people can apply for a tax refund but has nothing on the losers under the Jindal plan.

“We’re only seeing one side of the story,” said Jim Richardson, an LSU economics professor who holds one of four seats on the state Revenue Estimating Conference that determines how much money will be available for the state to spend. “Higher sales taxes have to come from someone. It has to come from someone’s family from purchases, or from a business owner’s family or from a worker’s family or from a hotel, etc.

“At this point, it’s hard to identify who would pay the taxes. It may be that businesses would pass along the higher sales taxes. That would mean us. But it’s not clear that businesses can pass along the taxes.”

Richardson also pointed out that the Jindal administration’s charts on winners don’t appear to include the impact of the proposed $1.05 per pack increase in cigarette taxes, from 36 cents per pack to $1.41.

“The cigarette tax has regressivity built into it,” Richardson said, meaning that the increase will hit low-income smokers hardest.

A request for more information from Jindal’s press secretaries went unanswered Thursday.

If businesses are indeed the losers under Jindal’s plan, that would be because administration officials are listening to concerns expressed in recent days that the shift to sales taxes threatens to take a disproportionate swipe at the poor. It will also hit retired government workers because they don’t pay income taxes today and therefore will reap no benefit from the tax being replaced with higher sales taxes.

More than 200 ministers on Monday slammed Jindal’s overall plan because they said it would be regressive.

Jindal has said repeatedly in recent days —  including in an op-ed published Thursday by Times-Picayune — that they are wrong. He claims his plan includes a program to offset higher taxes on the poor and another one for retired government workers. But the administration has yet to release the details of exactly how they would work.

Many political insiders believe that Jindal’s primary goal in announcing his intention to eliminate state income and corporate taxes is the approving pats on the head he can expect in national Republican circles as he pursues his presidential dream. He has already been praised by Grover Norquist, perhaps the country’s leading anti-tax advocate.

A column on RealClearPolitics, another popular conservative website, has also praised him.

“If he succeeds, I imagine he will vault himself to the top tier of Republicans looking to replace Obama,” wrote Daniel Mitchell, a senior fellow at The Cato Institute, a libertarian think tank in Washington, D.C.

But will conservatives around the country continue to throw bouquets his way once they learn that he wants to raise taxes on business to pay for his plan?

Some of the bloom may already be off the rose. Over the weekend, Jindal tied for last place, with failed vice presidential candidate Sarah Palin, in a presidential straw poll at the Conservative Political Action Conference outside of Washington.

The visit to Houma was the first part of what aides say will be a statewide tour by Jindal. The governor also plans a television advertising campaign financed by wealthy donors.

Jindal pitched his plan last week to the House Ways and Means Committee, which gets first crack at it on the legislative assembly line. If it passes Ways and Means – which seems likely – it will then go to the 105-member House, where approval would require 70 votes.

If it passes the House, a steep challenge, Jindal will need 26 votes in the 39-member Senate for the House measure to become law.

The legislative session begins on April 8.

To date legislators have not embraced Jindal’s plan, in part, they say, because Jindal has failed to provide information they need.

“Somebody in the long run will pay more in sales taxes than income taxes,” said state Rep. Frank Hoffmann, R-West Monroe, a Ways and Means member. “Some will pay less. It has to balance out.”

State Rep. Major Thibaut, D-New Roads, also a Ways and Means member, said it’s too early to know whether he will support the governor. “At this point, I can’t tell you who the winners and losers are,” he said.

Said state Rep. Chris Broadwater, R-Hammond, a member of Ways and Means: “We want to see the numbers so we’ll have a comfort level on how it will impact businesses and people in every economic strata. We want to make sure that two plus two equals four. We need economists we respect to punch the numbers.”

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  • So, should they lower taxes then? Say lower taxes on the poor?

    But the poor don’t pay taxes and they use most of the tax revenues in the form of social services like
    (a) EBT, Food Stamps,
    (b) Section 8,
    (c) failing public schools cause the parents don’t really care about their children,
    (d) alcohol and drug rehabs,
    (e) mental services,
    (f) health services for their sick babies and kids (now that’s really high).
    (g) more police to control the problems of the poor.

    Or perhaps you can cut administrator’s salaries? Or perhaps politician salaries or their staff salaries? Or maybe school teacher salaries?

    Does the state really have money? Probably not with a declining population for the last 40 years and no Fortune 500 companies in New Orleans and say 2 in the entire state.

    The state SHOULD cut INVENTORY tax, regardless of what St. Charles gets from it (give them an exception if you have to.)

    Here’s WHY. The Port of Orleans would have more business and encourage MANUFACTURING for a tire and auto plant if it didn’t have INVENTORY TAX. WHY a tire and auto plant? Cause the Port of New Orleans has the highest cargo shipped in America of rubber and steel, that’s why.

    But because some politicians of long ago wanted to tax inventory and machinery and thought that no company could go nowhere else and had to stay in Louisiana, companies said, yes we can leave and then LEFT New Orleans and Louisiana.
    Same for Detroit.
    END of STORY.

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    “The cigarette tax has regressivity built into it,” Richardson said, meaning that the increase will hit low-income smokers hardest.

    Will it really hit the low income smokers the hardest?

    Or maybe they should be hit hard so they don’t hit the state hard with future health care costs?

    Getting people to quit means LOWER COSTS on HEALTH CARE and workers have LESS medical problems and SHOW up for work? And showing up for work means more salary for the worker who also pays taxes on his/her salary.

    And it also means a MORE QUALIFIED WORKFORCE who actually show up for work or school instead of calling in sick with one excuse after another.

    When 40% of the Louisiana population makes too little to be taxed, it means that the population’s (40%-who-pay-no-taxes) behavior is a big problem.

    Same with alcohol. The amount the state pays to support (via EBT, Section 8 and Housing) SINGLE MOMS whose multiple ex-husbands or ex-BF can’t keep or want a job is bankrupting the state of Louisiana as well as verifying to companies that Louisiana has an unskilled workforce.

    And to think that Jimmy’s, bars, corner grocery stores and others need a liquor license is going to help NOLA tax wise? If the state has 40% who don’t pay taxes cause they make to little, you can be sure Orleans Parish is even higher with those who don’t pay taxes cause they are too unskilled, drunk, addicted, sick, you name it, one excuse after another.. And Orleans has more bars per capita than anywhere in the nation.

    How about GAMBLING as well? Has that really helped Louisiana? Or the Lottery? If it did, where’s all the companies looking to come to Louisiana? Or where are the 130,000 who left after Hurricane Katrina?

    OR, perhaps nothing should be done in Louisiana and the slow population decline should continue for another 40 years?

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    Perhaps Jindal, as well as everyone else in the state, should look at the homestead exemption and see also how other states do it. (<– history over the years)

    At first look, Louisiana's $75,000 Homestead Exemption has apparently not helped Louisiana whatsoever in the last 40 years or so.

    Everyone should be paying something so they know the costs and value of living inside of Louisiana.

    At $75,000, it appear to be the highest tax deduction/credit/loophole/gift of all homestead exemptions in the USA. It's also the simplest to understand as well.

    And Louisiana with it's low property values, makes it a really big gift for property owners and allows them to be CARE FREE about the property.


    This high homestead exemption probably contributes to BLIGHT after Hurricane Katrina as property owners don't really have to sell as they have no expenses and a very low, or no property taxes to pay.

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  • Elderly n Fixed Income could be grandfathered into any Homestead
    Exemption Changes. Section 8 Property Owners should receive no homestead

    Anything to promote responsible and accountable home/property ownership would help get rid of BLIGHT.

    With such a high homestead exemption, the rich and poor could purchase house or inherit a house and NOT have any incentive to keep it in good shape.

    Many have LEFT Louisiana but still own the property and have NO INCENTIVE to sell or fix up due to almost no costs in owning it via a very high homestead exemption of $75,000.

    The don’t pay property taxes and it’s such bad condition, why pay property insurance or flood insurance? Or some see it as a rental and get Section 8.

    In fact, with such a high homestead exemption, it encourages “affordable” housing, which is really cheap rent with no neighborhood responsibility via SECTION 8.

    What New Orleans needs is RESPONSIBLE HOUSING. Not AFFORDABLE “care free” Section 8 housing.

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  • The $75k Homestead Exemption, while not available for 2nd houses and
    rentals, STILL makes it financially easier for irresponsible property
    owners as they don’t have to pay for at least one house in the big picture of things.

    New Orleans’s residents can’t have it both ways, If it want to make housing “AFFORDABLE”, it also makes BLIGHT and irresponsibility, “affordable”. This is because the property owner has almost no property taxes to pay and no financial incentive (or penalty) to make things better or to run things better.

    New Orleans and Louisiana needs RESPONSIBLE HOUSING POLICIES far far more than AFFORDABLE HOUSING.POLICIES.

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  • IN A TYPE OF BACKDOOR WAY, the $75k Homestead Exemption promotes the common resident to buy houses to RENT out.

    Hence, the $75k Homestead Exemption eventually promoted RENTING over OWNERSHIP. And New Orleans is mainly rentals, e.g. around 70%?

    Basically the $75K Homestead Exemption promoted the buying of 2nd houses used for rent since the 1st house has almost no property taxes to pay.

    Thus, every other house is a rental due to the $75k Homestead Exemption.

    I think all the real estate agents in the NOLA area promote this type of “buy-a-house-and-rent-it-out” financial strategy cause the property tax is almost nothing. And this is whether or not it’s a 1st house or a 2nd house.

    From the fact that for the last 40 years the population has been declining, only 1 or 2 Fortune 500 companies, high rental to ownership ratio in New Orleans, almost no manufacturing due to taxes on inventory and machinery, you can bet the homestead exemption had plenty to do with that.

    Sounds a lot like what Michigan and Detroit did to the car companies. Politicians made promises to the POOR and LAZY so long ago and now there is almost nothing left but the poor and lazy.

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  • The $75k Homestead Exemption, in some ways, is no different than Section 8.

    The $75k Homestead Exemption, in some ways, is no different than say a NINJA Loan.

    The $75k Homestead Exemption, in some ways, is no different than those ZERO Deposit, ZERO Interest Loans.

    The $75k Homestead Exemption allows some people, WHO SHOULD NOT be OWNING a HOUSE, the ability to own or rent a 2nd house. Louisiana has a population where 40% don’t make enough money to pay any taxes.

    Thus, why should they, the poor or the 40%, even own a house? Should they not get a better job FIRST, when many can’t afford a house and that’s even with a too generous $75k homestead exemption?

    Generating taxes thru Sales Tax is more difficult to verify than Property Taxes.
    Generating taxes thru Income Tax is more difficult to verify than Property Taxes.
    Generating taxes thru Inventory Taxes is more difficult to verify than Property Taxes.
    Generating taxes thru Machinery Taxes is more difficult to verify than Property Taxes.

    It’s a lot harder to cheat on one’s property taxes as there is a big physical house or building
    and piece of land that everyone can see.

    There is also a LOT LESS DEDUCTIONS and LOOPHOLES when using PROPERTY TAX as opposed to say income or sales taxes.

    If you think about it, Louisiana’s too generous Homestead Exemption for the last 40 to 80 years is no different than the NINJA loans in California, Nevada and Florida. Those NINJA loans eventually resulted in bankruptcy, crime and blight and whole housing sub-divisions that are almost abandoned.

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