Louisiana is facing a fiscal crisis, with more than $1.3 billion in temporary taxes due to expire in 2018. Addressing the Legislature on the opening day of the 2017 session, Gov. John Bel Edwards said the problem will not be fixed without fundamental changes to the tax structure. Edwards said he is willing to entertain proposals and ideas from legislators on both sides of the aisle, but has seen very little constructive input or action from those who oppose his ideas. The AP’s Melinda Deslatte was there:
“This is the big moment. The structural deficits have gone on for too long. The resistance to doing what is right and necessary to fix this problem once and for all is no longer acceptable,” Edwards told the House and Senate. Republicans, particularly House GOP leaders, haven’t embraced Edwards’ ideas. Rather than support a tax plan to raise more dollars for the state treasury, they’re suggesting reductions in state government spending. Edwards struck directly at them, without citing party affiliation or naming anyone. He said if lawmakers want to talk about “lower taxes and a more efficient state government,” they need to follow that up with “exactly what is it you intend to cut, what college or hospital do you want to close, what road in your district you’d rather not see built or repaved.”
The House Ways & Means Committee started hearing tax bills this morning, including parts of the governor’s plan. But the biggest and most controversial element of Edwards’ plan – the proposed Commercial Activities Tax (CAT) on business – has not yet been filed as legislation. The governor told The Advocate’s Tyler Bridges that he is determined to ensure the details of the CAT are fair and easily understood before moving forward.
Edwards said he is trying to make sure that his proposal – which would establish what he calls a “commercial activities tax” – does not unduly penalize high-volume, low-profit businesses, such as grocery stores. “We are looking at formula where we can make sure it’s more fair for those types of businesses,” Edwards said, adding that he might need as long as two weeks before he nails down the version that he wants lawmakers to consider. “Some states choose to have a different rate for different businesses, depending on their sector in the economy.” He added, “We can’t pass something people don’t understand or that overwhelms the process.”
Some legislators are skeptical that any new taxes will can pass this session, given the two-thirds threshold needed for tax legislation. Gannett’s Greg Hilburn spoke with lawmakers:
“I don’t believe we could get 70 votes to agree it’s Monday,” said Rep. Robby Carter, D-Greensburg, referring to the two-thirds majority needed to pass new taxes in the Republican-led House. Acadiana lawmaker Rep. Stuart Bishop, R-Lafayette: “There’s going to be a ton of gridlock. There are a lot of things coming out of the the governor’s office that are dead on arrival.” Even one of the governor’s most fierce allies, House Democratic Caucus Chairman Gene Reynolds of Minden, is skeptical lawmakers can agree on major reforms, whether it be taxes to close budget shortfalls or justice reforms that would reduce Louisiana’s prison population.”This session, in one word, will be tough, and the toughest part will be getting 70 votes,” Reynolds said. “It’s also going to be tense.”
Struggling in the South
Louisiana has the third highest poverty rate in the nation, with nearly 1 in 5 Louisianans living below the federal poverty line. Now comes a report that Louisiana also ranks low on measures of economic mobility. Economic mobility is a measure of residents’ chances of moving out of poverty and into the middle class. Lack of economic mobility is a problem across the South. Research by the Equality of Opportunity Project found that a number of different factors contributed to a city or state’s level of economic mobility but that state policy decisions play a significant role. Alana Semuels, staff writer for The Atlantic, reports:
Of course, some of the reasons the South is lagging behind when it comes to economic mobility have to do with very specific policy choices made by state governments. Southern states have low minimum wages, so many poor people make less than they do in other regions, and have less money to spend on creating opportunities for their children. Paltry wages negate any potential benefit that might be derived from lower housing costs or number of open positions. Southern states also generally spend less on education than other states do. While states like New York, New Jersey, and Massachusetts spend $15,000 per student on elementary and secondary education, North Carolina spends almost half that, at $8,500 per student, and other states such as Tennessee and Mississippi spend around the same, according to Governing magazine. Research also suggests that tax policy is especially regressive in the South, meaning the tax burden falls the hardest on low-income families.
Car insurance and the cost of poverty
Despite existing laws that prohibit discriminatory rate setting practices, an investigation by ProPublica and Consumer Reports uncovered substantial differences in car insurance premiums based on race. The investigation focused on four states, and revealed that car insurance companies charge an average of 10 to 30 percent higher rates for drivers living in predominantly minority neighborhoods compared to those living living in mostly white neighborhoods, despite similar driving records and risk levels. The higher premiums not only hurt the minority consumer’s pocketbook but can also put them at risk of greater economic instability. ProPublica’s Julia Angwin, Jeff Larson, Lauren Kirchner and Surya Mattu report:
The impact of the disparity in insurance prices can be devastating, a roadblock to upward mobility or even getting by. Auto insurance coverage is required by law in almost all states. If a driver can’t pay for insurance, she can face fines for driving without insurance, have her license suspended and eventually end up in jail for driving with a suspended license. Higher prices also increase the burden on those least able to bear it, forcing low-income consumers to opt for cheaper fly-by-night providers, or forego other necessities to pay their car insurance bills. Rachel Goodman, staff attorney in the American Civil Liberties Union’s racial justice program, said ProPublica’s findings were distressingly familiar. “These results fit within a pattern that we see all too often — racial disparities allegedly result from differences in risk, but that justification falls apart when we drill down into the data,” she said.
Flood money begins to flow
It’s been eight months since deadly floods inundated thousands of homes in South Louisiana, but federal funds for rebuilding are just beginning to make their way to the state. After some politically charged back-and-forth between Gov. John Bel Edwards and Rep. Garret Graves, the state has finally received approval to begin distribution of the $1.6 billion in flood aid awarded by Congress last fall. The state, however, is still working through several federal requirements that must be completed before money can actually be disbursed. Elizabeth Crisp has the details:
The timing comes just as the state launched an online survey that is serving as the initial intake for the planned homeowners’ assistance program application process. The state is this week setting up environmental reviews that the federal government requires to access the U.S. Department of Housing and Urban Development dollars. “The process for drawing down the flood recovery funds is long and sometimes overly burdensome,” Edwards said in a statement. “While it is often frustrating that we can’t get assistance to homeowners quicker, we are able to immediately move forward with our recovery plans.”
Number of the Day
95,000 – Number of Louisiana households that use federal rental assistance to rent modest housing at an affordable cost. Eighty-nine percent of those households included a person who is elderly, disabled, or a child. (Source: Center on Budget and Policy Priorities)