The case against (most) new tax breaks

The case against (most) new tax breaks

It took 10 legislative sessions since 2016 – including four last year alone – for Louisiana lawmakers to return some stability to the state budget after a decade of chronic shortfalls. But multiple efforts are already underway to undermine last year’s hard-won revenue compromise: several bills that have gained traction at the Capitol would create new tax breaks or roll back the temporary sales tax renewal. The AP’s Melinda Deslatte reports that Gov. John Bel Edwards didn’t close the door on all the tax proposals, but doesn’t want to dismantle what took so long to build:

“Here we finally achieved some level of stability, and the Legislature introduces a slew of new exemptions and so forth,” the governor said. “So I think, for the most part, these are things that we should not be considering at this point in time. And it is my intention to protect the state general fund and the budget.”

As LBP’s Neva Butkus writes in a new blog, legislators can take several important steps this session toward making Louisiana’s tax structure more robust and fair. Some tax cuts, including proposals to remove the sales tax on diapers, feminine hygiene products and college textbooks and to create a child tax credit would put low- and moderate-income taxpayers on a more level footing with their wealthier peers. Meanwhile, ending an unproductive income-tax break that flows mainly to the richest taxpayers would give Louisiana the revenue stability and the resources it needs to invest in everyday Louisianans.


Reducing the racial wealth gap

While momentum is growing among progressives to narrow the vast disparity in wealth between white and black Americans, many are also realizing that a conservative U.S. Supreme Court makes it unlikely that any explicitly race-based solution to this problem could withstand judicial scrutiny. Emily Badger of the New York Times looks at two potential workarounds offered by 2020 presidential candidates – Sen. Elizabeth Warren’s proposal for down-payment assistance to buyers in formerly redlined neighborhoods, and Sen. Cory Booker’s proposal for “baby bonds.”

The court is unlikely to uphold baby bonds or housing programs explicitly for African-Americans, even to remedy disparities created when many government benefits were explicitly for whites. Affirmative action and government contracting programs have similarly struggled to meet or skirt the court’s strict scrutiny for applying benefits by race. Proponents concerned about the wealth gap instead must come up with policies that have the effect of disproportionately building wealth for African-Americans, without singling them out. … Policies like the mortgage interest deduction, for example, disproportionately benefit white families, who are more likely to own homes. So do tax advantages for the rich, who are more likely to be white. Even federal investments in seemingly race-neutral infrastructure like the Interstate Highway System had this effect by enabling the development of all-white suburbs in an era of legal discrimination. Wealth-building proposals today are trying to engineer a similar if opposite outcome. That makes the details thorny.


Trade war hits home in Louisiana

President Donald Trump has made good on his promise to escalate his administration’s ongoing trade war with China, imposing 255 tariffs on more than $200 billion worth of imported goods starting on Friday. This morning, China retaliated by announcing tariffs on $60 billion of U.S. goods starting June 1. The Advocate’s Anthony McAuley reports that Louisiana’s trade-dependent economy is particularly at risk:

“No good is going to come from the tariffs themselves,” said Paul Aucoin, executive director of the Port of South Louisiana, which handles most of the bulk cargo exports out of the state, particularly grain. “The president’s plan is to use them to coerce China into making trade concessions, I understand that, but in the meantime it is the grain people who are going to suffer most from the tariffs.” Kyle McCann, a spokesman for the Farm Bureau of Louisiana, said the first wave of tariffs last year hit at a time when unusually wet weather meant that planting was badly affected. “All of Louisiana’s soybeans go to the river, to export markets, and China is our No. 1 export market,” he said. “When export markets are not moving, it really is a killer; it doubles the problems.” For some farmers in the south of the state, there wasn’t even relief from the Trump Administration’s $12 billion Market Facilitation Program, a subsidy offered to compensate for the tariffs. To qualify for the subsidy, the crop had to be harvested, but for many farmers the extraordinarily wet weather meant many crops were left in the field.


Local Alternatives to Payday Lending

Almost everyone faces a financial emergency now and then. But if you are one of the 1 in 5 Louisianans living in poverty, those emergencies threaten your ability to buy food or pay rent. Enter the predatory payday loan industry, which offers short-term cash loans that can carry annual interest rates above 400%. As an alternative to loan products that prey on people with desperate financial need, a group of Shreveport churches created the Hand Up Loan Program, which offers relief for people caught in the payday loan debt trap, as Jacque Jovic found when he interviewed several who have benefitted from the program:

Dozens of new beginnings have been funded by faith. “I was on drugs. I was on alcohol,” said Clydell Hall. “Now I have my own home. I own two cars, two jobs.” One of those jobs is at Highland Center Ministries. It’s where Clydell Hall found help when he desperately needed it. He was a homeless veteran who needed a car to get to school and work. He was able to get a $2,500 loan through the Hand Up Loan Program. … People borrow money at a fixed-rate less than 10-percent, have access to a low-fee ATM, go through credit counseling and make a budget to repay the loan. “The money that comes in from them repaying the loan goes back into the pot to help other people who are in need,” said [John] Henson[, Pastor at Church for the Highlands.


Number of the Day

2.6 – Percentage of America’s total wealth held by African-Americans, who make up 13% of the population. (Source: Duke University via The New York Times)