Years of efforts to reform Louisiana’s regressive and overly complicated tax code have run aground in the state Legislature. The result: Louisianans pay the second-highest sales taxes in the nation, while the tax code is riddled with costly exemptions and deductions. The state’s broken tax structure is a major reason why the state lurched from budget crisis to budget crisis over the last decade and has struggled to fund critical programs and services like higher education and health care. The Advocate’s editorial board shares its thoughts on the latest report from the Institute on Taxation and Economic Policy:
According to the study, Louisiana has the 14th most regressive tax code among the states. Analyst Neva Butkus of the Louisiana Budget Project summarized the findings: “A Louisiana household in the bottom fifth of income earners, with an annual income of $17,100 or less, pays nearly 12 percent of that income in state and local taxes. A household earning in the top 20 percent, with an annual income of $91,500 or more, pays less than 8 percent of their income in state and local taxes.”That is true even as Louisiana has a relatively high top rate of income tax — not California-high but still at 6 percent a higher formal rate than many states. Part of the problem is the number of big exemptions, aiding the higher-income taxpayer the most.
Tax analysts from varying schools of thought agree that Louisiana’s tax code needs some serious work:
A larger problem, also decried by the more conservative-leaning Tax Foundation, is the high rate of sales tax and a poorly designed sales tax structure. Louisiana’s sales tax system is just a fraction behind Tennessee for combined state and local levies at the cash register. It is also shot through with exemptions, and fails to capture revenues from services, one of the most important economic segments in a modern economy. All this is enough to make the analysts cringe, from whatever the ideological point of view they approach the problem.
Takeaways on new public school grades
The state Department of Education released new performance grades for public schools in Louisiana last week. The revised standards have caused tension among school administrators, particularly in New Orleans, because the scores will be used to determine whether a charter school stays open. Wilborn P. Nobles of Nola.com| The Times- Picayune offers six major takeaways for New Orleans in the new performance system:
The scores matter more in New Orleans than anywhere else in Louisiana: All but two of the city’s 79 schools are charters, and school officials consider the scores when determining whether to keep those schools open. Several schools in the city are already on the chopping block, and the fate of their charter renewals will be decided by the Orleans Parish School Board Thursday (Nov. 15). Overall, the city’s score dropped under the new formula, but Orleans Parish still held onto its “C” letter grade. OPSB’s rank amongst other Louisiana parishes jumped four positions this year from 59th last year to 55th this year.
Tax cuts are not raising wages
The Tax Cuts and Jobs Act turns one year old next month. The omnibus tax cut law has provided a deficit-financed “sugar-high stimulus” to the economy, particularly large corporations and their shareholders. While wage growth has picked up over the past year, it continues to lag growth in the economy as a whole. The New York Times’ Jim Tankersley and Matt Phillips have more on the economic impact of tax reform:
Americans for Tax Reform compiled a list of 750 companies, and growing, that said they would pass tax savings on to workers in some form. Data from large public companies, however, suggest that most workers received relatively small shares of their employers’ corporate tax savings. The nonprofit research group Just Capital, which is tracking 1,000 large public companies’ reports of how they are spending their tax cuts, calculates that the typical worker at one of those large companies has received about $225 this year in increased salary, a one-time bonus, or both, attributable to the new law. Workers for those companies were more likely to see their wages rise if they lived in states where the minimum wage was relatively low — and where companies do not have to pay workers more to compensate for high housing costs.
The “jobs” part of the Tax Cuts and Jobs Act has failed to materialize: since the Act was passed, the 1,000 largest companies in in the United States have eliminated 140,000 jobs – nearly double the number of jobs they created during that period. Meanwhile, the federal government is bleeding red ink at the worst possible time:
Despite a remarkably strong economy, the fiscal health of the United States is deteriorating fast, as revenues have declined sharply. The federal budget deficit — the gap between what the government collects in revenues and what it spends — rose to $779 billion in the 2018 fiscal year, which ended Sept. 30. That was a 17 percent increase from the prior year. It’s highly unusual for deficits and borrowing needs to grow this much during periods of prosperity. A broad variety of analysts attribute the widening deficit to the tax cuts (along with increased military and other domestic spending ushered in through a bill Mr. Trump signed earlier this year). The growing budget gap means the Treasury must borrow more to keep the government running. The Treasury expects to borrow a total of $1.338 trillion from global investors this calendar year. That would be 145 percent higher than the $546 billion the federal government borrowed last year. That would be the highest level of borrowing since 2010, when the American economy was struggling to recover from the great recession.
Summer Pell Grants work for community college students
Federal Pell Grants have long been an important source of financial assistance for low-income college students. In the early years of the Obama administration, Congress and the president implemented “Year Round Pell Grants,” allowing students to receive Pell Grants support during the summer semester. This policy change significantly increased student enrollment in community college during the summer and led to more students completing a community college program. Tough budget cuts caused the program to be terminated in 2012. However, Congress and the Trump administration have reinstated the program and, according to a new survey by the American Association of Community Colleges, more students are enrolling in community college as a result. Paul Fain of Inside Higher Ed has more on the impact summer Pell Grants have on student enrollment:
Almost 83 percent of responding colleges reported increases in Pell Grant recipient enrollments this past summer compared to the previous one. And half saw increases of 15 percent or more. “We are pleased that the survey documents what we have heard from campuses across the country, that the reinstated year-round Pell Grant has had a truly dramatic impact,” David Baime, senior vice president for government relations and policy analysis at AACC, said in a written statement. “In particular it appears to have helped students stay continuously enrolled, and accelerating time to degree has always been a prime reason to provide aid 12 months of the year.”
Number of the day
19.1 – Percentage of Louisiana’s youth aged 10-17 who were obese in 2016-2017, the fourth-highest rate in the nation. (Source: The Pew Trusts)