Louisiana and Kansas consider scrapping income taxes to improve business climate

By: Richard S. Davis
12:00 am
January 24, 2013

Louisiana Gov. Bobby Jindal and Kansas Gov. Sam Brownback have both voiced support for pro-growth tax reform based on eliminating personal income taxes.

From NRO:

“Eliminating personal income taxes will put more money back into the pockets of Louisiana families,” Jindal said in a statement earlier this month, “and will change a complex tax code into a more simple system that will make Louisiana more attractive to companies who want to invest here and create jobs.”

From NYT:

On Wednesday, lawmakers received a bill to inch the state closer to eliminating income taxes, a centerpiece of a broad legislative vision that many in the Republican Party here hope will serve as a model of conservative governance for other states, if not the nation, to follow.

…This month, the largest tax cut in Kansas history took effect, and most of its Medicaid system was handed over to private insurers. The bill introduced this week would pare taxes further, with the goal of eventually eliminating the state’s individual income tax.

The personal income tax falls heavily on business owners, as noted here, and states seeking to attract jobs and investment are right to consider reducing or eliminating it. Further, Standard and Poor’s Rating Service gives Washington good marks for the stability of its tax structure. (h/t Jason Mercier)

The state’s reliance on retail sales and business and occupation (gross receipts) taxes for a combined 69% of general fund tax revenues (on a budgetary basis) typically affords more revenue stability than other states enjoy because many of them rely on personal income tax revenues.

In Olympia, House lawmakers held a hearing Monday on Washington’s tax structure, which House Democrats have called one of the best and one of the worst, noting reports that WA has a business-friendly but regressive tax structure. As John Stang reports in Crosscut, WRC economist Kriss Sjoblom testified at the hearing.

Also Monday, Kriss Sjoblem, vice president for the business-oriented Washington Research Council, told the committee that businesses paid 56.6 percent of the state and local taxes collected in 2011 for Washington.

Even without an income tax, Washington businesses carry a heavy tax load. While major tax changes are unlikely this year, lawmakers should take note of the reforms being contemplated in states looking to boost economic activity by becoming more attractive to business. It’s all part of the big sort.

Categories: Categories , Current Affairs , Economy , Tax Policy.