The various groups that have looked at Louisiana’s broken tax structure have all come to a similar conclusion: The state needs to strengthen its personal income tax by getting rid of expensive deductions, and lower a state sales tax that is the highest in the country (when combined with local levies). That was the recommendation from the blue-ribbon Task Force on Structural Changes in Budget and Tax Policy, the conservative Tax Foundation and LBP, among others. Until this week, Gov. John Bel Edwards had said he planned to follow the recommendations of his task force. But that has apparently changed, and the administration is now apparently seeking to scrap the corporate income and franchise tax in favor of a broad new sales tax on gross receipts. The Advocate’s Tyler Bridges reports:
Eliminating the corporate income and corporate franchise taxes — which together are projected to raise about $500 million this year — would also eliminate the dozens of tax exclusions, credits and exemptions that now exist in the tax code. … Four states have the tax, known as a tax on gross receipts, that Edwards favors. Louisiana’s would be modeled on the one in Ohio, which imposes a 0.26 percent tax on all sales. Businesses that sell at least $150,000 a year must pay the tax.
Edwards also favors lowering the existing sales tax and expanding its base by taxing activities and services.
Many of the services that the governor wants to make subject to sales taxes — including cable TV and internet service — are already taxed in neighboring Texas. …“We’re trying to achieve a structurally sound tax system that allows us to have the necessary revenue to fund government services,” Revenue Secretary Kim Robinson said in an interview. “We are broadening our tax base and lowering the rates.”
Gross receipts taxes have sharp critics across the political spectrum. The Tax Foundation says it creates a “haphazard pattern of incentives and disincentives for business operations.” The Institute on Taxation and Economic Policy notes that gross receipts taxes are regressive, lack transparency, and tend to favor large multinational corporations at the expense of small businesses, especially those with low margins.
Justice Reinvestment gains momentum
Gov. John Bel Edwards’ Justice Reinvestment Task Force released its recommendations Thursday for how Louisiana can reduce its world-leading incarceration rate and invest more money in programs that reduce the chances that offenders will return to prison after release. As Rebekah Allen with The Advocate reports, members of the task force believe Louisiana can reduce its prison population by 13 percent and save taxpayers $150 million over the next decade if their 26 recommendations are adopted.
Criminal justice reform advocates, including Gov. John Bel Edwards, stressed that Louisiana’s incarceration rate is not high because the state has more criminals. In fact, crime rates in Louisiana are not out of line with its Southern peers. Instead, policies and laws put in place under the guise of being “tough on crime” have led to longer sentences and fewer opportunities for release. These policies have proven to be expensive for the state without making the public measurably safer…”Our policy decisions have been driven by fear, and not hope balanced with reason,” Edwards said. “What we’re doing isn’t working.”
While most of the recommendations have unanimous support, five have received opposition from the Louisiana District Attorney’s office and others.
“The commitment made to victims is imperative to us,” said District Attorney Bo Duhe, the sole prosecutor on the task force…Pete Adams, executive director of Louisiana District Attorneys’ Association, said the association has wide-ranging concerns about the unintended consequences of reducing penalties for people convicted of violent crimes. But he is hopeful that some of those concerns will be allayed when the recommendations are written into legislation.
Overview of the Medicaid budget
Gov. Edwards’ spending recommendations for the 2017-18 fiscal year call for a $229 million reduction in state general funds for Medicaid. Total spending on Medicaid, however, will increase by $1.4 billion due to an influx of federal funding from the Medicaid expansion. A new blog post by LBP’s Jeanie Donovan breaks down the state’s health care budget.
The main reason overall Medicaid spending is projected to increase in 2017-18 is because more people are enrolling in the program. The Louisiana Department of Health expects that the program will cover an additional 200,000 people next year compared to FY 2017. While the Medicaid expansion significantly increased the number of low-income adults receiving Medicaid, the bulk of Medicaid beneficiaries (71 percent) still are “traditional” Medicaid enrollees, including low-income children and their caretakers, disabled persons, and seniors. The rise in Medicaid coverage has driven Louisiana’s uninsured rate to a historic low, putting the state on the path to improved population health outcomes, reduced emergency room care, long-term savings and economic growth.
Need-based grants help both students and universities
State cuts to higher education funding have left TOPS and Go Grants substantially underfunded. Despite data showing that low-income students who receive TOPS and Go Grants are 39 percent more likely to graduate than those who receive only TOPS, recommended funding for the need-based grants is $100 million below what is needed in Gov. John Bel Edwards’ executive budget. The lack of sufficient funds for need-based aid may be hurting both Louisiana students and universities according a story about need-based grants at Georgia State University by Tina Rosenberg with the New York Times:
Ten years ago, 26 percent of African-American students graduated. Now 56 percent do. Ten years ago, 22 percent of Latino students graduated. Now 55 percent do. The school leads the nation in eliminating the usual disparities between white and minority rates. This isn’t just good for students, it’s been the only counter to the state funding cuts, Renick said. Students in school pay tuition and bring in aid money. Students who drop out don’t…The grants are easy on Georgia State’s balance sheets, since they not only retain the students, but also return all of the outlay in the form of payments to the school. By keeping each student, the university also continues collecting their tuition, fees and aid, which in the 2012-13 academic year averaged $3,000 per semester for each student.
Number of the Day
$150 million – Amount of money taxpayers will save over the next decade if 26 recommendations from the Justice Reinvestment Task force are adopted. (Source: The Advocate)