Nov. 3: Tax recommendations are a starting point

Nov. 3: Tax recommendations are a starting point

The recommendations from the Task Force on Structural Changes in Budget and Tax Policy are a solid starting point for creating a 21st Century tax system that puts Louisiana’s budget on a more stable and sustainable course.

The recommendations from the Task Force on Structural Changes in Budget and Tax Policy are a solid starting point for creating a 21st Century tax system that puts Louisiana’s budget on a more stable and sustainable course. But state policymakers will need to go farther to make sure Louisiana has the revenue it needs to make important investments that lead to shared prosperity. The goal of tax reform should not just be to stop the bleeding – although that’s important. The goal should be to raise enough revenue to begin reinvesting in programs that can move Louisiana forward and provide families and businesses the stability they need as they plan for the future. A preliminary analysis from the Institute on Taxation and Economic Policy shows that even if the Legislature agrees to the sales tax and income-tax changes recommended by the task force, Louisiana will still not have sufficient revenue to make the investments needed.

From LBP’s “Our Two Cents” blog:

The task force proposed eliminating the federal income-tax deduction, rolling back federal excess itemized deductions and narrowing income-tax brackets to earlier levels – all of which represent much-needed reforms to our broken tax code. Returning Louisiana’s state sales tax rate to 4 percent while broadening the base and unifying collections between state and local government represents sound tax policy. Task force members should also be commended for preserving the Earned Income Tax Credit and School Readiness Tax Credits, which are critically important tools for working families, and for recommending important reforms to the way corporations are taxed in Louisiana. Finally, it’s notable that the task force members did not recommend additional cuts to the budget. After spending hundreds of hours reviewing Louisiana’s budget and tax structure, they understood clearly that state programs have already been cut to the bone.

The AP’s star reporter, Melinda Deslatte, has a helpful overview:

A 13-member study group of economists, tax experts and other policy leaders, created by state lawmakers, released its proposals Wednesday after months of work. The ideas will form the basis of a planned tax overhaul debate in the 2017 legislative session. The proposals, “if adopted as a comprehensive set of reforms, will help to establish a long-term, stable foundation for Louisiana’s finances,” Revenue Secretary Kimberly Robinson and LSU economist Jim Richardson, co-chairs of the task force, wrote to legislative leaders. Times-Picayune’s Julie O’Donoghue isn’t terribly impressed.

The task force has returned to several concepts and ideas floated previously with little success in the Louisiana Legislature. It suggests eliminating the state federal tax deduction for income taxes or restricting federal itemized deductions on income tax payments. The task force said the Legislature should also look at phasing out an expensive state business inventory tax and tax credit which benefits local governments. It recommends an automatic sunset on all business incentive programs, and the elimination of those tax credits programs which don’t work. It also suggests changes to the state’s industrial tax exemption that are similar to those already being implemented by Edwards.


F. King fires back

LSU President F. King Alexander was not pleased with Rebekah Allen’s story in The Advocate showing that Louisiana’s flagship university is the only SEC school where donors give more money to athletic programs than academics. Alexander didn’t dispute Allen’s findings, but offered a different take in a letter to the editor:

LSU is an outlier in the SEC, as one of only two universities in the conference with an athletic program that takes zero state or student dollars while also giving back to the academic side — in LSU’s case, providing academics with nearly $10 million annually. In fact, only 7 out of 230 athletic programs in the country are self-sufficient. This separation between LSU’s academic and athletic functions is due to the university’s decision in the late 1970s to make Athletics financially independent, allowing LSU to concentrate its assets in the classroom instead of subsidizing athletic programs. Conversely, it should also be noted that Louisiana is an outlier in that it leads the country in cutting state funding to higher education and is the only state in the country to require a two-thirds vote of both chambers of the Legislature to adjust tuition.


Full rides or investments?

Hillary Clinton’s campaign promise to make in-state public colleges tuition free for most families would cost an estimated $50 billion per year. But Brookings’ Matthew Chingos looks at some potential alternatives that would steer low- and moderate-income students to college by making federal aid more targeted.  

Both types of policies—reducing tuition and increasing spending on institutions—would present design challenges for federal policymakers. Federal free college plans require either bailing out the states that spend the least on their public colleges or creating a system of incentives for states that will likely result in less than universal participation. It would be much more straightforward to provide new targeted aid through an expanded version of the Pell grant program, which could also be made more simple, transparent, and easy to access (e.g., by eliminating the FAFSA and using income tax records to determine eligibility).


Discrimination in the sharing economy
A new study found that that in some cities, drivers for ride services like Uber were more likely to cancel a trip request if the passenger used a name that is associated with African Americans. The Washington Post reports on how the companies that dominate the sharing economy are working to fight prejudice.

The study, released Monday by the National Bureau of Economic Research, joins similar papers finding that black people have a harder time renting rooms on Airbnb and selling goods on eBay. These kinds of findings can have legal ramifications. A recent lawsuit sought damages from Airbnb, claiming that the company’s website — which emphasizes people’s profiles and photos — fosters discrimination. In response, the companies have taken steps to reduce the possibility of racial bias affecting people who use the services. Before accepting a trip, for example, Uber drivers see only a passenger’s location and star rating. Airbnb has announced a host of measures to reduce racial discrimination on the platform.


Number of the Day

85 – Percentage growth in the total value of tax exemptions, exclusions and credits for Louisiana sales, income and mineral taxes, 2008-2015 (Source: Task Force on Structural Changes in Budget and Tax Policy)