Tuesday, February 23, 2016

Tuesday, February 23, 2016

Reform the federal income tax deduction; House GOP softens on taxes?; Contract reform can't fix the budget mess; and College campuses are crumbling because of lack of upkeep

Reform the federal income tax deduction.

There are two key questions confronting Louisiana officials as they grapple with the most serious budget crisis in a generation: How much new tax revenue does Louisiana need in order to maintain the critical services that citizens expect? And secondly – who should pay those extra taxes? As things stand, Louisianans as a whole are lightly taxed compared to the rest of the country; our state has the fifth-lowest state and local tax burden, according to the Tax Foundation. But the distribution of those taxes is skewed against those who can least afford to pay. While the poorest 40 percent of taxpayers give 10 percent of their income to state and local taxes (mostly sales taxes), those in the top 1 percent give up just 4.2 percent of their taxable income. Fortunately, as LBP’s Jan Moller argues in a new blog,  Louisiana policymakers have a rare opportunity to reform an unproductive tax break that costs the state nearly $1 billion per year: the deduction for federal income taxes.

 

As tax breaks go, it’s hard to find one that costs more than the federal deduction – nor one whose benefits flow more heavily to the wealthiest taxpayers. An analysis done by the Institute on Taxation and Economic Policy for LBP found that the deduction cost Louisiana $968 million in uncollected tax revenue in 2015. More than one-third of that (36 percent) helps the top 1 percent of tax filers, who have an average taxable income of almost $1.4 million. Only about 1 percent of the benefits flow to the bottom 40 percent of tax filers – those earning less than $37,000 per year in taxable income. Compare that to the proposal to raise the state sales tax by 1 percent through a “clean penny,” which appears to be the only tax proposal that’s gaining momentum at the Capitol. … While 57 percent of the cost of repealing the federal deduction would fall on the top 5 percent of income earners, only 13 percent of the extra sales tax revenue would come from the top earners.

 

House GOP softens on taxes?
Republican leaders in the state House, whose support is critical to the success of Gov. John Bel Edwards’ revenue package, are belatedly coming around to the idea that new revenues are needed to cope with Louisiana’s historic budget deficits. As The Advocate’s Tyler Bridges reports, it’s still far from clear which tax measures will win approval from the Ways & Means Committee and which ones will be left to languish.

 

The leader of the Republican-controlled House, Speaker Taylor Barras, told reporters Monday that testimony on the impact of cuts before the Appropriations Committee shows that the state needs more revenue. “The testimony has magnified the true cost of the cuts we face,” Barras, R-New Iberia, said, adding that he expects the full House on Thursday to take up the tax bills approved by Ways and Means. Barras and other House Republican leaders say it will be easier for rank-and-file Republicans to vote for new taxes if Edwards will agree to long-term structural changes in the budget.

 

Contract reform can’t fix the budget mess

Reducing the number of and size of state contracts has become a common refrain among legislators looking for a relatively painless way to cut the budget. But discussion in Monday’s committee meetings showed that contract reform, while politically popular, is not as easy as supporters claim. Legislation offered by Rep. Lance Harris of Alexandria calls on the commissioner of administration to review and cancel any wasteful contracts by March 1. But Commissioner Jay Dardenne had to temper legislators’ high expectations. Nola.com/The Times-Picayune’s Kevin Litten has more:

 

“It’s not going to save the day in terms of a fiscal crisis we’re in right now,” Dardenne said. The largest state contracts are “doing things the state is not equipped to do lest you want to expand the state’s employee base many-fold.” … “You’re talking about thousands of contracts, they need to be reviewed, but we’re not going to be able to review those by the time this special session is completed,” Dardenne said. “I don’t want you to pass the resolution as-is thinking you’re going to get some answers between now and the end of session. It’s just not realistic or practical.” But the realities of the situation aside, many legislators praised Harris’ bill as an important measure to get legislators directly involved in budget cuts. Harris consistently pitched the bill as a business-oriented approach to running the state.

 

College campuses are crumbling because of lack of upkeep

A new report from the Louisiana Legislative Auditor found that, after years of requests for state funding for repairs, Southern University’s campus has become hazardous for students. Broken smoke detectors and lack of compliance with the Americans with Disabilities Act are among the many issues plaguing the campus, putting students and faculty at risk. But, as The Advocate Rebekah Allen explains, Southern is not alone. As cuts to colleges and universities continue, crumbling campus buildings has become business-as-usual across the state:

 

Just in the past two years, Southern has requested $22 million for repairs and maintenance to address 41 projects. It only received money for seven projects, totaling $4.8 million, which has left the school virtually helpless in its ability to make a dent in the decaying state of the campus. Southern has more than $111 million in deferred maintenance projects in its backlog. … Among the findings of the report that was released Monday, auditors found that 21 of the 140 buildings at Louisiana’s largest historically black university had “life safety code deficiencies” that had been previously cited by the Office of the State Fire Marshal. The violations ranged from broken sprinkler systems and elevators to missing ceiling tiles and electrical panel issues. … Across the state, the total backlog for deferred maintenance for Louisiana’s four- and two-year public schools ranges from $1.5 billion to $2 billion.

 

Number of the day:

$968 million – Cost, in uncollected revenues, of Louisiana’s federal income tax deduction in 2015. (Source: ITEP analysis for LBP)