Report: Louisiana Taxes Working-Poor Further Into Poverty

Report: Louisiana Taxes Working-Poor Further Into Poverty

While most other states exempt working-poor families from the income tax, Louisiana is one of a small number of states that continue to levy an income tax on working families living in poverty. By reducing state income taxes for working-poor families, Louisiana could help these families work their way toward the middle-class, according to an annual report on state income tax trends.

(Baton Rouge – April 4, 2012) While most other states exempt working-poor families from the income tax, Louisiana is one of a small number of states that continue to levy an income tax on working families living in poverty. By reducing state income taxes for working-poor families, Louisiana could help these families work their way toward the middle-class, according to an annual report on state income tax trends.

Louisiana is one of only 10 states to tax families of three who are living below the national poverty line and one of only 15 states to tax families of four below the poverty line. The poverty line is $17,922 per year for a family of three and $23,018 per year for a family of four. Louisiana taxes all income above $16,800  for a family of three and $21,300 for a family of four.

“Louisiana should help working-poor families reach the middle-class rather than taxing them deeper into poverty,” said Jan Moller, director of the Louisiana Budget Project. “Not only would reducing income taxes for Louisiana’s working-poor encourage work and reduce poverty, it’s also the right thing to do for our families and our economy..”

The findings were released today by the Center on Budget and Policy Priorities, a non-partisan policy research organization based in Washington, D.C.

Taxing the incomes of working-poor families is contrary to years of bipartisan efforts at both the federal and state levels to help such families work their way into the middle class, the Center’s report shows.

States have used a variety of tax exemptions, deductions and credits, particularly state Earned Income Tax Credits (EITC), to reduce or eliminate the income tax obligations of the working-poor. State EITCs, modeled after the highly successful federal version, reward work by allowing struggling families to keep more of what they earn. For two decades, an increasing number of states adopted such tax credits and deductions, but progress has stalled in recent years.

Louisiana currently offers a small state EITC. Expanding the amount of the federal EITC that a taxpayer can claim on a state return would be one of the best ways to help working families get out of poverty.

“Exempting working-poor families from state income taxes is good for Louisiana’s economic future,” said Phil Oliff, co-author of the report and policy analyst at the Center on Budget and Policy Priorities. “Raising the income of poor families boosts children’s chances of academic success and their earning potential in adulthood.”

The Center’s full report can be found at: http://www.cbpp.org/cms/index.cfm?fa=view&id=3740

The Louisiana Budget Project (LBP) participates in a national network of 41 nonpartisan, independent organizations known as the State Fiscal Analysis Initiative (SFAI) coordinated by the Washington, D.C.-based Center on Budget & Policy Priorities.

LBP provides independent research and analysis of Louisiana fiscal issues and their impact on low and moderate income residents. For more information on the Louisiana Budget Project, visit www.labudget.org.