Senate starts to examine budget

While most of America was barbecuing, the Senate Finance Committee spent Monday afternoon examining the budget bill that the House sent their way last week. Melinda Deslatte with the Associated Press has the details, and reports that legislators still need to find at least $155 million in the next few weeks:

Most remaining gaps, after House action, are in the state health department and in payments to the operators of LSU’s privatized hospitals. In addition, without more money, LSU’s medical schools in New Orleans and Shreveport would be left to absorb millions in insurance and retiree costs from the privatization deals. Medical school leaders have said those added costs could leave them struggling to pay their bills, and senators questioned whether the financial burden could jeopardize the medical schools’ accreditation. “They’re awfully close to the edge,” said Sen. Sherri Smith Buffington, R-Keithville. In the House version of the budget, cuts also would fall across public health care services, state parks, museums and agricultural services.The list of shortfalls could grow by another $28 million or more, depending on what the Senate wants to include. Sherry Phillips-Hymel, the Senate’s chief budget analyst, said of $18 million in hurricane recovery money used by the House for some health care expenses, “We’re not sure if that money actually exists.”

To close the remaining shortfall, Gov. Bobby Jindal’s budget chief Kristy Nichols recommended tapping $27 million in unclaimed lottery funds and reminded senators of a bill that could increase drivers’ title fees by $79 million next year if passed, continuing the trend of relying on one-time money and heavy fee hikes to balance the state budget, instead of having an honest debate about taxes.

Sometimes, it’s personal

The Advocate’s Tyler Bridges gave readers an unusually intimate portrait on Sunday of what drives one legislate in his quest to increase Louisiana’s cigarette tax. Rep. Harold Ritchie, a lifelong smoker and undertaker by profession, has worked for years to increase Louisiana’s meager 36 cents a pack cigarette tax, which is far below the national average of $1.54 a pack. What drives him? Research that says a higher tax will keep fewer kids from ending up like him. Ritchie has had numerous family members die from smoking, and publicly acknowledges he expects the habit to kill him as well. But the “Digger” faces an uphill struggle to improve public health:

“I guess it’s my family history and being in the funeral home business and seeing friends who smoked die at a young age,” he said, adding that he has no score to settle with the tobacco companies. “I can’t hurt them. They make billions of dollars. I can only try to change the price so young people won’t start smoking and smokers will think about quitting.” Including his own children. “I told them they don’t need to be smoking,” Ritchie said. One listened to him while the other two didn’t — “just like I didn’t listen to my daddy.” (His wife quit smoking several years ago.) On April 27, even before the public testimony began, the Ways and Means Committee chopped Ritchie’s proposed $1.18 increase to 32 cents. The new 68-cent tax rate would match Mississippi’s, lawmakers noted. (Mississippi has the 37th-lowest cigarette tax nationally.)

There is still a chance that Ritchie’s bill could be strengthened by the Senate,which would be a welcome development for public health. The Campaign for Tobacco-Free Kids estimates bringing Louisiana’s cigarette tax in line with the national average would cause 43,400 people in Louisiana to stop smoking and keep 34,600 from ever starting, which would prevent 22,300 premature deaths and save the state millions of dollars in health care costs. A lower cigarette tax increase, by contrast, could easily be absorbed by tobacco companies, resulting in little public health benefit.

Robin Hood in reverse

It isn’t just an empty slogan. A recent study from Federal Reserve staffers found that most states’ tax systems do more to exacerbate income inequality, not reduce it, the Wall Street Journal reports:

New research by a trio of Federal Reserve staff economists finds that, on average, state taxes increase income inequality, albeit only slightly. Most of the tax systems’ impact on income inequality comes through the federal tax code. But—and here’s the most interesting finding—state tax systems vary enormously. In a few states, Minnesota, Oregon and Wisconsin among them, state taxes reinforce the effects of the federal tax code, further shrinking the income gap between rich and poor beyond what federal taxes do. But in others, Tennessee, Mississippi and West Virginia among them, state taxes undo about one-third of the inequality-reducing force of federal taxes.  In two of the most populous states, Illinois and Florida, state taxes undo roughly one-sixth of the inequality-reducing effects of federal taxes.

Unfortunately, the news isn’t encouraging for Bayou State residents, with the state’s tax system ranking fourth worst for increasing inequality.

A tax break for the people
A week after passing a proposal to repeal the corporate franchise tax, the House Ways and Means Committee will hear legislation on Tuesday to double the state’s Earned Income Tax Credit (EITC). Currently, Louisiana offers a credit equal to 3.5 percent of the federal credit–the lowest match in the nation. But Rep. Walt Leger’s House Bill 70 would double the impact for working families, injecting another $47 million into neighborhoods across Louisiana.

The benefits of the EITC for children are well-documented, with a mountain of evidence showing that even modest income boosts improve school performance and completion and lead to higher lifetime earnings, along with fewer teen pregnancies and reduced run-ins with the criminal justice system. And more income in local neighborhoods means more local jobs.

Number of the Day

22.4 percent – Degree to which Louisiana’s tax system offsets the progressive effects of the federal tax system. Translation: It is expensive to be poor in Louisiana (Source: Wall Street Journal)