Friday, February 19, 2016

Friday, February 19, 2016

EITC in the spotlight; Corporate tax giveaways; Bob Mann: Illusions about the state’s budget and; America’s stacked deck

EITC in the spotlight

The House tax committee heard two bills concerning the Earned Income Tax Credit Thursday – one (House Bill 5 by Rep. Walt Leger III of New Orleans) that would double the credit and another (House Bill 4 by Rep. Tony Bacala of Prairieville) that proposes to eliminate it. Both bills were returned to the calendar without a vote after a lively debate about a tax credit that helps low-income working families afford basic necessities. Melinda Deslatte of the Associated Press was there:


On the books since 2007, the Earned Income Tax Credit piggybacks off a similar federal program, allowing families to receive a state tax credit that equals 3.5 percent of the federal credit. Twenty-nine percent of all tax filers in Louisiana claimed the credit last year, receiving an average $96.93, according to the Louisiana Budget Project, which advocates for poor and moderate-income families. Bacala said only half of states offer similar programs, and he noted Louisiana gives money to people above their state tax liability. “This is not an income tax return. This is an extra check,” he said.   


Supporters of Leger’s bill to double the credit said the program allows working people to keep more money to pay their bills and spend in the economy. They said studies show children in families who receive the tax break perform better in school, making them more likely to become taxpaying citizens themselves. “It is one of the very best tools available for fighting poverty,” said Jan Moller, director of the Louisiana Budget Project. The House committee didn’t make a decision on either bill Thursday. Lawmakers on the panel will consider the whole package of tax proposals together after reviewing all the bills.


Corporate tax giveaways

The House Ways and Means Committee is scheduled to hear several measures today that seek to curb corporate tax giveaways that have contributed to the state’s massive budget shortfall. The Department of Revenue reports that the state gave away $210 million more in credits and rebates to corporations than it took in this year. The Advocate’s Tyler Bridges has more:


A tax break here and a tax break there, over time they have added up, as The Advocate reported in a 2014 series of articles: Tax breaks for six major programs alone cost the state $1.08 billion in 2014, up from $207 million in 2004. Another factor: sharp-eyed tax attorneys and accountants have gotten increasingly skilled in gaming Louisiana’s tax system, said Kimberly Robinson, the Edwards administration’s secretary of Revenue. She should know. Until January, she found ways for clients to lower their taxes while at the Jones Walker law firm. “Our tax code needs to be updated to reflect the modern economy,” Robinson said in an interview Thursday. “We’re giving away more than we can afford to give.” Robinson’s predecessor, Tim Barfield, showed the extent of the corporate tax avoidance with a report he released last year. It found that of the 87 largest companies that filed corporate tax returns in 2012, only one-quarter of them paid corporate income taxes in Louisiana, even though 96 percent of those that make financial reports public said they were profitable. Of the 87, only half paid corporate franchise taxes in Louisiana. “Many companies received refunds from refundable tax credits that exceeded their income and franchise liability,” the report found.


Bob Mann: Illusions about the state’s budget

Journalism professor Bob Mann says lawmakers and other politicians who claim that budget cuts are the solution to the budget crisis are trying to sell illusions. Here are some examples he offers in his column on the Times Picayune opinion page:


Closing or consolidating a few universities will save the state big money.
…What if we closed and merged some universities? We could “save” $85 million in state appropriations by closing Nicholls, Grambling State ($14.8 million in state appropriations), Northwestern State ($21.6 million) and UNO ($32.7 million). Unfortunately, that’s merely 4.25 percent of next year’s shortfall. In fact, if the state shuttered all 10 universities in the University of Louisiana (UL) System, the state would save about $240 million in direct appropriations. Put another way, those institutions’ state funding is equal to 12 percent of next year’s anticipated shortfall. The truth is, the state has already cut deeply higher education. Legislators have slashed appropriations to the UL system by 55 percent since 2009, forcing schools to sharply increase fees and tuition.


We should un-dedicate the dedications.

All but about $3 billion of the state’s $9 billion general fund budget is locked up – or dedicated – by the state’s constitution or by statute. Kennedy and others suggest we should simply undo those statutory dedications and spend the money on universities and health care. But, as former state budget director Stephen Winham recently asked, “How about the $159 million in lottery proceeds? Surely, we can find a better use than education for that money. The $184 million in the Medicaid Trust Fund for the Elderly? We only have to change a statute to cut the old folks off.”


America’s stacked deck
Columnist Nicholas Kristof of the New York Times looks at the populist waves that seem to be sweeping through both major parties this election year, and says it’s no coincidence that anti-establishment candidates are finding favor with voters. Kristof concludes that the populists are right – the American political system is rigged in favor of wealthy elites. But the question for voters is what to do about it.


So it’s healthy for American voters to be demanding change. But when societies face economic pain, they sometimes turn to reforms, and other times to scapegoats (like refugees this year). So the historic question for 2016 is which direction the popular revolt among American voters will ultimately take. A President Trump or President Cruz would build walls and waterboard suspected terrorists, a President Clinton or President Sanders would raise the minimum wage and invest in at-risk children.It seems to me to make more sense to target solutions than scapegoats, but sense is often in short supply in politics. After a characteristically brilliant speech by Adlai Stevenson, the Democratic nominee for president in 1952 and 1956, a supporter is said to have bellowed, “Every thinking American will vote for you!”


Number of the Day

12 – the percent of Louisiana’s budget shortfall that would be taken care of by closing all 10 universities in the University of Louisiana System (Source: Times Picayune)