Dozens of local nonprofit leaders learned how their clients and organizations could be affected by Governor Bobby Jindal’s proposed budget plan at a presentation April 2nd by the Louisiana Budget Project at Ashé Cultural Arts Center, sponsored by the Greater New Orleans Foundation.
“The effect that these tax changes would have on nonprofit organizations hasn’t really been talked about,” said Jan Moller, director of the Louisiana Budget Project, which monitors and reports on state tax and budget policy their impact on Louisiana’s low- to moderate-income families.
The governor’s plan, which is designed to be “revenue neutral,” would eliminate Louisiana’s income tax on individuals and corporations, along with the corporate franchise tax. To recoup the lost revenue, the state sales tax would be raised from 4 percent to 6.25 percent. The state sales tax would also be expanded to include 36 categories of services, many of which are relied upon every day by nonprofit organizations, including the following:
- Accounting, tax preparation, bookkeeping and payroll services
- IT and technical support services, including web hosting
- Facility support services (janitorial, security, reception)
- Courier, delivery and messenger services (UPS, FedEx)
- Event services (hiring event promoters or managers; renting a museum or historical site for a fund-raiser).
The plan would also eliminate a number of tax exemptions which are currently claimed by some nonprofits, including the following:
- Sales of donated property by charitable institutions
- Homeless shelter room rentals
- Advertising services
- Sales of original art in cultural districts
- Construction materials and operations supplies for nonprofit retirement centers
- Sales of construction materials for Habitat for Humanity, Make it Right Foundation, Hands on New Orleans and Rebuilding New Orleans Together covenant partners.
The governor’s plan is meant to spur economic growth. But Moller said that switching from income taxes to higher sales taxes would shift the tax burden from the wealthiest individuals and corporations to low- and middle-income earners. Sales taxes disproportionately affect those in the middle and at the bottom because those individuals spend a much higher percentage of their income on goods and services. The tax-shift plan would raise taxes on small businesses, nonprofits, and retirees on fixed incomes.
Moller said many nonprofit organizations could face increased demand for services under the governor’s plan, as the state’s chronic budget shortfalls would likely continue and low-income residents face higher taxes.
For more information, visit www.labudget.org.
Click here to view the Powerpoint from Louisiana Budget Project’s presentation by Jan Moller on April 2, 2013.