New Study Shows Jindal’s Tax Proposal to be a Model for State Success
Almost 12,000 new jobs and over $1.7 billion in extra disposable income – that’s the quantified impact of Governor Jindal’s proposed tax reform plan for Louisiana, according to a new study by the Beacon Hill Institute at Suffolk University in Boston, MA. Jindal’s proposal would eliminate the personal income tax and raise the sales tax while broadening the base to include previously untaxed services. The governor’s plan would also close many exemptions used by businesses paying the state’s severance tax.
The study quantified the impact of Jindal’s proposal using a computable general equilibrium (CGE) model calibrated to reflect the state’s economy and the governor’s proposal. The model used by the Beacon Hill Institute calculates the dynamic impact of policy changes on state economy. The study found that if Governor Jindal’s tax reform was enacted, the state could almost immediately add 11,810 jobs, see a raise of $1.749 billion in disposable income (approximately $910 per family) while balancing the budget. The proposed reforms call for an increase in the state’s sales tax by 1.88% from the current level of 4%. Should the proposal become law, Louisiana’s state sales tax would be 5.88%, still considerably lower than that of neighboring Texas at 6.25%.
Louisiana’s tax reform proposal would swap the state’s income tax for a broadened sales tax immediately, without any transition period. As such, the Beacon Hill Institute estimates that most of the benefits of the proposal would also arrive immediately. Naysayers of tax reform always look at a static picture of the economy and argue that proposals such as this one are simply exercises in tax-burden reshuffling. Studies such as the one by Beacon Hill Institute have pointed out time and time again that dynamic effects of tax reform can make everyone better off. No other proposal exists in Louisiana today that can immediately put more money in family pockets, create nearly 12,000 jobs, raise disposable income across the board, and balance the budget at the same time. This one’s a keeper.