Louisiana residents want quality public schools, health care and strong state universities, but our state’s broken and inadequate tax system consistently leaves state lawmakers without enough revenue to fully fund those priorities. In a new blog, LBP policy analyst Nick Albares reveals how Louisiana ranks among the lowest-taxed states in the nation on most (but not all) measures:
In 2016 Louisiana ranked 40th among states in general fund revenue per capita. The general fund is made up of money raised mostly from state sales, income and severance taxes. General fund dollars are allocated toward important state programs, with more than three-quarters going to health care, human services and education. In 2017 Louisiana moved up to 32nd place in per-capita revenue, mainly due to $1.38 billion in temporary revenue measures that expire on June 30. While Louisiana ranks in the bottom half of states in state revenue collected, state residents also pay relatively low local taxes. This is mainly due to our residential property taxes, which are the 3rd lowest in the country.
Louisiana’s combined sales tax, however, is the highest in the nation. The burden of this regressive tax falls most heavily on the poor:
While the temporary one-penny state sales tax is a part of this, the No. 1 ranking is driven by higher-than-average local sales tax rates (to make up for the low property taxes at the local level)…Because all people, regardless of income, pay the same sales tax rate and lower-income people use a higher proportion of their income on purchases, the sales tax hits those at the bottom and middle of the income spectrum harder than those at the top.
Potential for economic growth
Louisiana is poised to continue its economic recovery and add thousands of new jobs in 2018, according to the annual survey of the state’s economy by LSU professor emeritus Loren Scott. But, economic growth does not happen in a vacuum and will be greatly impacted by decisions made in the state legislature and Congress. The Advocate’s editorial board honed in on what’s at stake for the Baton Rouge area:
Still, more normal growth rates — 0.7 percent in 2018, 0.9 percent in 2019 — will be driven by projects in health care, the Baton Rouge Port and new high-tech companies, Scott forecast. One note, though: “Resolution of the ‘fiscal cliff’ will likely add drag to this state-government-job-rich area.” That single sentence shows that action, or inaction, in the State Capitol over the budget and expiring taxes to fund government will have a disproportionate economic impact in the Baton Rouge area.
State and local governments have been using tax incentives to try to lure businesses for decades, but in recent years, the size and scope of the incentives have ballooned. The ubiquity of the incentives is on fully display as localities vie to become the home of Amazon’s second headquarters. Joseph Parilla with The Brookings Institution analyzes whether the incentives are likely to help cities attract companies like Amazon:
At a certain point this is zero-sum and even self-defeating, as weakened government coffers cannot support the high-quality public goods that firms like Amazon demand. It is likely, therefore, that Amazon ends up choosing an already wealthy, innovation-rich and high-functioning region in North America’s eastern half. Bids from places like Boston or Toronto are not leading with tax incentives, but rather with commitments that build on current assets: connecting potential development sites to regional transit, establishing computer science training partnerships with educational institutions and creating research centers in technologies like artificial intelligence. By contrast, New Jersey offered $7 billion in direct tax breaks, one of the largest packages in American history.
State CHIP programs languish
As the end of the year nears, state CHIP administrators are growing increasingly nervous about the future of their programs and the children they serve. Leaders in Congress have been so singularly focused on ramming through their disastrous tax legislation that they’ve allowed CHIP to come to the brink of shutting down in several states. Paige Winfield Cunningham with The Washington Post reports:
Never have lawmakers let funding lapse so long for the Children’s Health Insurance Program, a uniquely bipartisan U.S. safety net program that covers about 9 million low-income children and pregnant women. It’s been two months since the last authorization ran out, and although states had some initial wiggle room in their finances, that window is rapidly closing. “This level of uncertainty is causing chaos on the ground,” [Oregon Governor Kate] Brown said. The situation is extra infuriating for health advocates because ensuring kids have insurance is one of the few health-care policies both parties agree on. It’s largely because of CHIP that the rate of uninsured children has fallen to a record low of 4.5 percent.
Justice reform caught in political crosshairs
Sen. John Kennedy has been an outspoken critic of the historic criminal justice reforms enacted by the state legislature earlier this year. The bipartisan reform effort was led to Gov. John Bel Edwards and several legislative champions, and is now being implemented by the Louisiana Department of Corrections. Many say Kennedy’s criticisms are purely political posturing, and in an op-ed for Nola.com/The Times-Picayune, Jarvis Deberry suggests that Kennedy should focus on the real problems in the state’s justice system:
“Our Louisiana Department of Corrections is utterly incompetent to administer this piece of legislation,” [Kennedy] said in a Nov. 28 video statement. In an interview with The Associated Press, Kennedy said, “Look at their track record. I wouldn’t hire these people to run a food truck.” What about the track records of the people who’ve been sending all those people to jail and prison? It seems like every time one turns around the Innocence Project of New Orleans is getting another wrongly convicted person out of prison. They are the people who helped free Jones last month. If track records concerned Kennedy, he’d be crafting folksy put downs for those who’ve made Louisiana an international embarrassment. He’d be angry, for example, at Orleans Parish District Attorney Leon Cannizzaro, whose office has strong-armed victims hesitant to cooperate by sending them phony subpoenas threatening jail.
Number of the Day
60 – percentage of people who oppose repealing the ACA’s individual mandate after learning that eliminating the mandate would increase premiums for people who buy their own coverage. (Source: Kaiser Health Tracking Poll)