Last week it was reported that the Governors of Nebraska and Louisiana would start movements to eliminate their state’s individual and corporate income taxes and adopted a broader based sales tax. I’ve been writing about this for the past several years. These states would join other Southern states such as TN, FL, and TX that rely heavily on sales tax as their primary source of revenue. TN, FL, and TX do have corporate level income taxes but no individual income tax.
Making such a transition could be tough to achieve given the tax credits and other incentives that are built into the income tax codes. Both Governors talked about eliminating sales tax exemptions as a way to broaden the base to make up for the lost income tax revenue. There are certainly some exemptions that could be eliminated, but others serve a very real economic development purposes and would likely be retained.
I suspect that these two states will not be the first during 2013 to make these types of announcements. When states do this, it puts a lot more pressure on the sales tax collections of these states. That means more audits and tougher enforcement rules. http://www.salestaxstrategies.com/white-papers/whitepaper-Effective-State-Sales-Tax-System.pdf
Ned Lenhart, CPA