The framework released for President Donald Trump’s tax plan favors the richest Americans, with most benefits going to the richest 1 percent of Americans. A new analysis by the Institute on Taxation and Economic Policy shows what that means for people in each state. In Louisiana, the richest 1 percent would receive 63.7 percent of the benefits of the proposal. Meanwhile, 1 in 10 Louisianans who make up the middle fifth of earners ($38,300 – $59,500 per year) is projected to see a tax increase.
The definition of “middle-class” varies by state but, as the state-by-state figures in this report demonstrate, in no state is this group the focus of the framework’s benefits. In fact, many households in the middle- and upper-middle portions of the income distribution would see their tax bills rise under the framework.
Economist Paul Krugman summed it up in his New York Times column:
Last week the Trump administration and its congressional allies working on tax reform achieved something remarkable. They released a tax plan — or, actually, a vague sketch of a plan — that manages both to add trillions to the deficit and to raise taxes on a large fraction of the population. That takes talent.
The Times’ Eduardo Porter notes that the tax plan wouldn’t likely lead to economic growth but would increase inequality.
Looking at a set of industrialized countries from the 1970s until the years preceding the financial crisis, the economists found no meaningful correlation between cuts in top tax rates and economic growth. Big tax cutters like the United States did not grow faster than countries like Denmark, which kept taxes high. What did respond to lower taxes was inequality: The income share of the top 1 percent grew much more sharply among big tax cutters like the United States than in countries like France or Germany, where top tax rates changed little.
The Brookings Institution’s Camille Busette explains what the plan would mean for equity.
Overall, given the relative position of blacks and Hispanics in the economy, it’s hard to see how this tax plan would not depress their opportunities for greater equity in the future. In other words, this tax reform plan gives a lift to growing inequality, and signals that the GOP is okay with persistent poverty and with the inability of one-third of us to feed our kids.
Early investments pay dividends
The strongest economies are the ones with the best-trained, best educated workers. And the earlier that education starts, the better for families, communities and the workers themselves. That’s why the best investments governments can make are in high quality early childhood education. As Entergy Corp. CEO Charles Rice writes in The Advocate, New Orleans (and Louisiana) has a long way to go in that department.
In New Orleans, only 12 percent of at-risk children under age four have access to affordable high-quality child care. A recent report, sponsored by Entergy, found that the lack of quality, affordable child care greatly impacts workforce participation and productivity of parents with young children. The research, conducted by the LSU Public Policy Research Lab and the Louisiana Policy Institute for Children, found that among parents with children age four and under, child care issues resulted in more than 16 percent quitting their jobs, nearly 14 percent turning down a promotion and 18 percent going from full-time to part-time status. Just over 40 percent of the parents surveyed reported that they missed work regularly due to child care issues in the last three months. Child care is not just a problem for our workers. The report found that child care issues cost Louisiana employers $816 million per year due to absences and turnover, and resulted in a loss of more than $1.1 billion for the state’s economy.
New hurdles for CHIP bills
Bills to renew funding for the Children’s Health Insurance Program are working their way through congressional committees, while states prepare for the worst. The New York TImes’ Robert Pear has more on states’ planning and the sticking points that are holding up smooth passage.
Utah, meantime, has formally requested authority to “eliminate eligibility and services under CHIP” if the state does not have enough money to continue coverage. … In the House, some Democrats have expressed concerns about the bill drafted by House Republicans because, they say, it would pay for continuation of the CHIP program by cutting other health spending. Some House Democrats have suggested offsets that would instead reduce payments to pharmaceutical companies.
The House bill calls for additional Medicaid funding for Puerto Rico (but not the U.S. Virgin Islands) in the aftermath of Hurricane Maria. The Center on Budget and Policy Priorities’ Edwin Park, Jesse Cross-Call, Judith Solomon, Shelby Gonzales and Paul N. Van de Water explain how both the underlying block grants for U.S. territories and the proposed temporary boost to Puerto Rico’s grant are inadequate, given the tremendous health needs on the islands.
Instead, for the short term, the block grants for Puerto Rico and the U.S. Virgin Islands need temporary increases sufficient to both sustain the underlying Medicaid program and address the higher demands resulting from the hurricanes. That should also include a temporary increase in the federal matching rate, as neither Puerto Rico nor the U.S Virgin Islands will be able to finance their current share of Medicaid costs anytime soon. For example, the federal government picked up 100 percent of states’ Medicaid costs related to survivors of Hurricane Katrina. To ensure fiscal stability over the long run, federal policymakers should eventually eliminate the cap on federal funding for Puerto Rico, the U.S. Virgin Islands, and the territories.
More needed to fulfill NOLA affordable housing goals
As LBP’s recent State of Working Louisiana report pointed out, much recent job growth is happening in low-wage sectors. This makes the role of housing policy all the more crucial, so that workers struggling to get by are able to have a decent place to live. HousingNOLA, a consortium of organizations working to expand affordable housing in New Orleans, gave itself a middling grade on implementation of its strategic goals. Nola.com/The Times-Picayune’s Greg LaRose has the story:
Its impetus was a decreasing inventory of apartments and homes tailored to the city’s working class, while property values and the taxes that accompany them trended upward. In addition, the initiative noted a pattern of stagnating wages, especially among the workforce that bolsters the city’s cultural economy. … “The recovery funds from Katrina are nearly exhausted and we produced approximately 500 new housing opportunities, a far cry from the 1,500 committed and the 3,330 needed,” Morris said in a statement accompanying the HousingNOLA report card.
Number of the Day
50 – Percentage of the state’s share of the proposed Trump tax cuts that would go to Louisiana millionaires, even though they make up only 0.3 percent of Louisianans. (Source: Institute on Taxation and Economic Policy)