When it comes to paying for government services, Louisiana asks a lot more of those with the fewest resources than it does of its wealthiest citizens, according to new analysis by the Institute on Taxation and Economic Policy. Thanks to a heavy reliance on sales taxes and tax exemptions that favor the wealthy, the less you earn in Louisiana, the more of you pay in taxes as a percentage of income. LBP’s Neva Butkus fills in the details:
The wealthiest households in Louisiana continue to pay state and local taxes at a lower rate than those in the middle class and below, according to a new analysis that breaks down the tax rates by income brackets in every state. The report, Who Pays? A Distributional Analysis of the Tax Systems in All 50 States found that households with incomes in the lowest 20 percent pay nearly twice as much of their income in taxes as households in the top 1 percent. Louisiana has the 14th most regressive tax code in the country, according to the report by the Institute on Taxation and Economic Policy. Louisiana households in the poorest 20 percent earn less than $17,500 per year, yet pay an average of 11.9 percent of that income in state and local taxes – higher than the national average of 11.4 percent. Households in the top 1 percent bracket, with a minimum taxable income of $473,000, pay at a rate of 6.2 percent of their income in taxes – well below the national average of 7.4 percent.
Louisiana’s tax structure is a choice made by policymakers over generations, who also have the power to change course. Changes to the state’s tax code can raise more revenue for essential and critically underfunded programs while ensuring that the state’s richest citizens pay their fair share.
Louisiana’s upside-down tax structure helps drive the state’s massive income inequality, and makes it harder for low- and moderate-income families to make ends meet and invest in their future. The good news is that policymakers have the ability to change course, by embracing some of the common-sense tax reforms that have been proposed by LBP and others.
Aging out of foster care, with tragic results
Former Gov. Bobby Jindal’s administration repeatedly slashed the budget for the Department of Children and Family Services, increasing foster caseworker caseloads by 60 percent over the state maximum and leading the state to kick foster kids to curb at their 18th birthday. Louisiana’s policy of starving the agency that cares for children who have no other guardians has had predictably tragic results. Reporting by NOLA.com | The Times-Picayune’s Richard A. Webster looks at the case of Rashaad Piper, who, after being released from the foster system into homelessness and with no continuing support from the state, became involved in a well-publicized 2017 attack on tourists.
A NOLA.com | The Times-Picayune investigation found that the two main attackers in the 2017 assault, Piper and Dejuan Paul, suffered from significant mental health issues. And yet, despite numerous opportunities for intervention, they did not receive the treatment they needed in the weeks and months leading up to the violent robbery. Advocates said this is the result of state budget cuts that have gutted Louisiana’s behavioral health infrastructure and policy decisions that have created obstacles to critical care. Joy Bruce, executive director of CASA New Orleans, an organization that provides court-ordered mentors to foster children, said Piper’s story is neither unique nor particularly surprising. When the state assumes custody of children with mental health problems, then releases them to fend for themselves when they turn 18, it stacks the odds against them. Within a year of aging out of the foster care system, 1 in 5 children are homeless and within two years, 1 in 4 are in prison, according to a 2017 report by the Louisiana State Task Force on Youth Aging Out of Foster Care.
Piper was among the 40 percent of foster children who struggle with mental health problems. Those children currently receive no transition services when they leave the foster system.
“Work requirements” take away benefits that keep workers healthy
Most people who can work and who receive benefits through the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps), do work, often in low-wage jobs with unstable hours. In fact, SNAP functions as a vital work support, helping families stay on their feet when they suffer a job loss or other financial setback. A new study by Lauren Bauer, Diane Whitmore Schanzenbach and Jay Shambaugh at the Brookings Institution adds to the growing body of evidence that the harsh new work requirements proposed in the House version of the Farm Bill, and increasingly under consideration for Medicaid recipients, would harm far more people than they help.
Most of those who fail the new work requirements are either those who are in the labor force already but who experience unstable employment, or those who might be eligible for hardship exemptions, such as those with health problems who are not already receiving disability income. Analyses of the composition of program recipients and of the labor market suggest that the proposed work requirements will put at risk access to food assistance and health care for millions who are working, trying to work, or face barriers to working.
But, the study’s authors argue, there are better options than work requirements for strengthening the job prospects for public assistance beneficiaries:
Steps such as increasing the EITC might be a very effective way to increase work participation in this group without the same administrative burdens and negative spillovers to vulnerable populations. (See Hoynes, Rothstein, and Ruffini 2017 for a specific proposal along these lines.) That proposal is estimated to increase participation by 600,000 people. Raising the returns to work via the EITC or other measures, creating training or educational opportunities that can increase individuals’ human capital, and providing child care or improved treatment and medical care to reduce health barriers to work could make full attachment to the labor force more viable for many individuals.
Criminal justice reform bears fruit
Thanks to last year’s package of criminal justice reforms, Louisiana is no longer the most incarcerated state in the nation. Now, the state is beginning to harvest the financial fruits of those changes. NOLA.com | The Times-Picayune’s Julia O’Donoghue reports that the state is redirecting $1.7 million that would have gone to keep people behind bars and applying it to services for crime victims instead. This money is part of significant savings that Louisiana realized by paring back its harshest sentencing practices.
An overhaul of Louisiana’s criminal laws has led to fewer people in prison saved the state $12.2 million in its first year of operation. By law, at least $8.5 million of that savings must go back into services meant to keep people out of prison, with 20 percent used specifically for victims services. Later this week, Edwards is expected to announce where an additional $2.6 million of the funding will go. Nonprofits, parishes and judges applied for grants with the prison system for that funding to expand incarceration alternatives and offer more support services for people getting out of prison. Department of Corrections Secretary Jimmy LeBlanc intends to spend most of the $8.5 million in savings on offenders from Orleans, Jefferson, St. Tammany, Caddo and East Baton Rouge parishes.
Studies have shown little connection between long sentences and crime deterrence. Long sentences do, however, break up communities and contribute to generational poverty among already disadvantaged populations.
Number of the Day:
1.2% – Percentage of income from the wealthiest 1 percent of Louisiana households that goes to pay sales and excise taxes. In comparison, 9.2 percent of income from the poorest fifth of the state’s households, who earn $10,500 a year, on average, goes toward sales and excise taxes. (Source: ITEP)