Archive for January 30, 2013

Statement from LDR Executive Counsel Tim Barfield on ITEP study and job creation

BATON ROUGE – It is ironic that ITEP – a liberal special interest group – launched an attack on the same day the Wall Street Journal editorialized in support of our proposal as well as other states who are seeking to eliminate income taxes. We have a fundamental philosophical disagreement with ITEP about how to help the poor and improve job opportunities for all Louisianans. Contrary to ITEP’s definition of fairness, we believe that the less money the government takes from people’s incomes, the better.

The best way to alleviate poverty is to create jobs, and the way to create jobs is by structuring a tax code that is fairer and simpler so that Louisiana can continue to foster an environment where businesses want to invest and create job opportunities for all of Louisiana’s citizens. Study after study has shown that companies move to places where taxes are lower, and job creation is the only sustainable way to combat systemic poverty.

There are progressive measures in the current tax code to help low-income groups, which we will retain in our final proposal. Sales tax exemptions are currently protected by the Louisiana Constitution and will remain so. The basic necessities of life – groceries, prescription medicine, and residential utilities – will remain sales-tax free. The proposal will also include some form of an Earned Income Tax Credit to offset any additional sales tax burden that might impact low-income Louisianans.

ITEP ignores an inconvenient truth: the states without a personal income tax – four of which are named in ITEP’s “Terrible Ten” list – helped create the most jobs in America over the last decade.

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Know the Facts: Personal Income Tax and the Economic Growth of States

Who Grows?

  1. From 2001 to 2011, states without a personal income tax of any kind experienced average annual GSP[1] growth of 4.81%, whereas states with a tax structure similar to that of present-day Louisiana experienced average annual GSP growth of 3.69%.[2]
  2. States without personal income tax grew their economies on average 1.13% more each year than those structured like present-day Louisiana.
  3. Had Louisiana’s economy grown 1.13% more each year between 2001 and 2011, it would have been 6% larger (about $15 billion or more than 100,000 jobs) than its actual size at the end of 2011. [3]
  4. Texas, a state with no personal income tax, grew at an average annual rate of 5.15% between 2001 and 2011.  New York, a state with a relatively high personal income tax, grew at an average annual rate of 3.49%. 
  5. In 2001, Texas’s economy was $42 billion smaller than New York’s economy.  By 2011, Texas’s economy was $151 billion larger than New York’s because of its faster economic growth.
  6. From 2002 to 2012, 62% of the three million net new jobs in America were created in the nine states without an income tax.[4]

 


[1] GSP, or Gross State Product, is a measure of the economic output of a state.  It is analogous to GDP, or Gross Domestic Product, which is the measure of the economic output of a nation.

[2] 2001-2011 Bureau of Economic Analysis, Public Domain. http://www.bea.gov/

[3] Louisiana Workforce Commission, Civilian Labor Force, December 2012.

[4] The Wall Street Journal, Jan. 30, 2013, on page A12 in some U.S. editions of The Wall Street Journal, with the headline: The State Tax Reformers.

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New Computer System to Prevent Tax Fraud

BATON ROUGE – Recent actions by the US Congress regarding the fiscal cliff legislation, known as the American Taxpayer Relief Act (ATRA), delayed the date when Internal Revenue Service (IRS) tax returns may be filed. Today, January 30, is the first day when federal income returns will be accepted. The Louisiana Department of Revenue (LDR) will also begin to receive income tax returns today.

The majority of IRS tax returns are now filed electronically. In 2012, 80 percent of all federal tax returns were filed electronically, fulfilling a goal Congress set in 1998. Since 2007, the number of Louisiana taxpayers filing their taxes electronically has risen by 58 percent. In 2011, 1.6 million Louisiana taxpayers (82 percent of the total number of Louisiana taxpayers) e-filed filed their state income tax return.

With the increase in electronic filing, tax fraud has skyrocketed. At the federal level, tax fraud remains the third largest theft of federal funds (just behind Medicare/Medicaid and unemployment insurance fraud) and has risen to a record 1.1 million cases in 2011. With the rise in electronic filing of Louisiana state income tax returns, state tax fraud has also increased. Tax fraud cases in Louisiana directly discovered as a result of current theft protection measures have risen to almost 23,000 cases in 2012.

LDR has taken steps to prevent e-filing fraud in coordination with the IRS. When current Executive Counsel, Tim Barfield and Chief of Staff Jarrod Coniglio first arrived at the agency late in 2012, a priority was placed on protecting the public from tax fraud with the installation and integration of new fraud protection software.

“When I first saw the data and the growing possibility for millions of dollars to be stolen from the state of Louisiana, we wanted to put in measures that would immediately maximize LDR’s efficiency to prevent tax fraud,” Barfield said.

LDR worked during December 2012/January 2013 to develop a customized Louisiana-specific fraud protection computer interface. The new system required a significant testing phase to assure accuracy of the system, protect taxpayer identity, and secure all confidential taxpayer information.

All state income tax returns received on or after January 30, 2013, will be subject to identity verification through the new tax protection software. The first taxpayer returns will be processed February 15, 2013. Refunds will begin to be issued on February 26, 2013.

If a return is identified as questionable in the review process, the taxpayer will then be directed to a customized online data test or a telephone survey that will serve as a secure method to verify the identity and final certification of the return.

“We are confident this new system will help protect the public trust against tax fraud,” Barfield stated. “Our goal is to increase the efficiency and effectiveness of this agency as we serve Louisiana taxpayers during the tax season.”

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