Day of reckoning on revenue

Day of reckoning on revenue

This afternoon’s hearing of the House Ways & Means Committee will go a long way to determining whether Gov. John Bel Edwards will even come close to his goal of raising at least $450 million for next year’s operating budget.

Day of reckoning on revenue

This afternoon’s hearing of the House Ways & Means Committee will go a long way to determining whether Gov. John Bel Edwards will even come close to his goal of raising at least $450 million for next year’s operating budget. The committee will take up one bill – HB 38 by Rep. Malinda White of Bogalusa – which would limit the federal deductions that taxpayers could claim on state returns. It would raise $117 million per year, mostly from upper-income taxpayers. The committee’s choice is clear: Agree to a modest tax hike on wealthy households (restoring the level of deductions that were available before 2003) – or be prepared to cut funding for K-12 schools, hospitals, public safety, child welfare and higher education. The Governor’s’ office views the bill as the last chance to plug the most serious budget holes with new revenue:

 

It’s time for every Louisianan to stand up and ask our legislature to do what is right for our state. For too long, our people have been suffering under irresponsible budgeting and devastating, unpredictable cuts. … This bill has the potential to raise more than $100 million in revenue needed for the fiscal year beginning July 1, 2016. That goes a long way towards closing our budget gap. … We can and will survive this historic budget crisis, but only if we all work together.

 

The Advocate’s Tyler Bridges reports that a budding compromise includes new concessions for anti-tax House conservatives that could give the bill new traction:

 

Breathing life into White’s bill are amendments restoring the income tax break in 2018, ensuring that taxpayers who itemize will continue to be able to take the deduction for charitable contributions and mortgage payments, and rebating the tax payments to taxpayers if the state collects more money than expected by 2018. State Rep. Jim Morris, R-Oil City and a staunch tax opponent, said in an interview Tuesday that he and state Rep. Neil Abramson, D-New Orleans, are prepared to vote for White’s bill if it includes their changes.

 

Rep. Ted James of Baton Rouge, writing in The Advocate, notes that opponents of raising new revenue have failed to come up with a good alternative.

 

No one’s holding TOPS, or any other program, hostage. The revenue simply isn’t there. Where else should we cut? Neither (Rep. Rick) Edmonds nor any of his allies in the House have suggested where the budget could be cut to fully fund TOPS. Or fully fund K-12 education. Or our colleges and universities. That means LSU and Southern University. That means the 343 TOPS recipients in Edmonds’ district will lose about half their money.

                                                                                                        

Flat-tax plan would be a costly mistake  

While the fate of excess itemized deductions is the focus of today’s legislative drama, a pair of bills await action on the House floor that could blow a $113 million per year hole in the state budget. The flat-tax bills (HB 7 and HB17) by Rep. Julie Stokes of Kenner are a well-intentioned attempt to reform Louisiana’s income tax. But LBP Director Jan Moller writes in a new blog that they fall far short, and would limit legislators’ ability to enact meaningful tax reform during the 2017 regular session.

 

An economic analysis by the independent Institute on Taxation and Economic Policy (ITEP) found that these bills – House Bills 7 and 17 – would result in $113 million per year in lost revenue to the state. That’s money Louisiana can ill afford to sacrifice at a time when critical health, education and public safety programs are threatened by budget cuts. … The Legislature should use the remainder of the special session to focus on raising enough revenue to avoid deep cuts to critical services.  House Bill 38, for example, would raise more than $100 million by reducing the amount of federal deductions that people could claims on their state returns. It would primarily affect wealthy households, who already pay low income taxes compared to their peers in other states because of the generous deductions in our tax code. When legislators return to Baton Rouge next April, the onus should be on long-term structural reforms that get the state out of its destructive pattern of balancing the budget with one-time dollars and temporary taxes.

 

Higher SNAP benefits would boost healthy eating

A new study from researchers at Dartmouth and Wellesley Colleges shows how an increase in SNAP (formerly food stamp) benefits would help low-income and food insecure Americans lead healthier lives. Using regression analysis and survey data, the authors of the new study show that a $30 boost to a family’s monthly SNAP benefit would likely mean recipients would buy healthier vegetables and poultry, and would leave them with more cash in their monthly budgets for other necessities. The Center on Budget and Policy Priorities’ Dottie Rosenbaum explains:

 

SNAP benefits, which average about $1.40 per person per meal, are based on the cost of the Thrifty Food Plan (TFP), a low-cost but nutritionally adequate diet established by the Agriculture Department.  … The $30-per-person monthly increase in SNAP benefits discussed in this study would represent roughly a 20 percent increase in the cost of the TFP.  This study’s finding that the bulk of a household’s additional resources resulting from a SNAP increase would go to food purchases highlights the significant constraints on these households’ food budgets.  Households would use only about 35 percent of the additional resources for other purchases, such as rent, gasoline, or household goods. In addition, the finding that households, if given additional resources for food, would spend them on more nutritious foods that may yield better long-term health outcomes is consistent with recent research comparing the long-term outcomes of people in different geographic areas when food stamps gradually expanded nationwide in the 1960s and 1970s.  

 

Louisiana taxpayers on the hook for failed start-up

Dinner Lab, a once-promising New Orleans culinary startup business, officially filed for chapter 7 bankruptcy last week after suddenly shuddering operations earlier this year. It now turns out that Louisiana’s taxpayers helped to fund the failed company through Louisiana Economic Development’s risky Angel Investor Tax Credit Program. Thirty-five percent of all investments in Dinner Lab could be applied against investors’ Louisiana tax obligations, prompting the state to dole out over $3 million in tax credits from 2013-2015 – with very little left to show for it. The Advocate’s Ian McNulty has the story:

 

Dinner Lab, which sold memberships for private dinners held in unconventional settings, expanded nationally from New Orleans and brought in some $10 million in investment capital before filing for bankruptcy last week. … The company’s meteoric rise was partly stoked by the state’s Angel Investor Tax Credit program. … The credits are transferable, meaning that an investor also could sell the credit for cash, usually at a discount. Such credits, also used in Louisiana’s film industry, generally sell for about 85 cents on the dollar. … “If it pays off, it’s supposed to pay off really big with lots of jobs and big successes in the state,” [Public Affairs Research Council President Robert Travis Scott] added. “It’s the state basically endorsing the idea of taking risks. The assumption going in is that you’ll have some failed companies — it’s the nature of it.”

 

Number of the Day

$116,700,000 – Annual State General Fund revenue that would be raised by HB38 – which seeks to limit excess federal itemized deductions on Louisiana tax returns (Source: Louisiana Legislative Fiscal Office)