States should tax the rich

States should tax the rich

The Covid-19 recession is wreaking havoc on state and local budgets. More than 1.5 million public-sector workers had been laid off as of late June, creating a drag on state economies at the worst possible time. While Congress can address the problem by passing a federal relief bill, Kitty Richards and Joseph E. Stiglitz of the Roosevelt Institute argue in The New York Times that states can also help themselves by raising taxes on those who are most able to afford it: 

When you fire a teacher, you harm her family and her. But you also harm the local grocery store where she shops, and all the other people and businesses she gives money to. … Tax increases, especially on high-income people who aren’t living paycheck to paycheck, are much less economically damaging, costing the economy only around 35 cents for every dollar raised. States and localities that raise taxes on the rich to increase spending will create at least $1.15 of economic activity for every dollar raised, and most likely closer to $2.15 or more.

But won’t rich people just flee to low-tax jurisdictions if they have to pay more taxes? Turns out that’s a myth. 

Some will argue that states can’t raise taxes by themselves because of interstate competition, but economic evidence shows that even in boom times progressive state tax increases don’t harm state economies or lead rich people to flee. Now, with education and public health on the chopping block without higher taxes, moving to a low-tax, low-services state is likely to be still less appealing, even for the wealthy: States that institute ruthless cutbacks will prove to be far less attractive places to live.


Coronavirus, recession, and Hurricane Laura
Black and Brown people in Southwest Louisiana were dying at disproportionate rates from Covid-19 and struggling to get by during the economic downturn. Last week they were dealt another blow when Hurricane Laura destroyed huge swaths of their communities. Buzzfeed’s Aldofo Flores has the story:

Officials said the death toll — which now stands at 17 in Louisiana — was lower than they feared, but the hurricane’s impact on people’s livelihoods was “catastrophic.” This is especially true for many of the area’s Black and Latino residents. They were already struggling with an economy battered by the coronavirus pandemic and with higher death and infection rates from COVID-19 than white people. Now comes yet another blow, at a time when many say they are least able to absorb it.Many areas that sustained heavy damage from Hurricane Laura, such as the city of Leesville, Allen Parish, and Jefferson Davis Parish, already had poverty rates well above the national average. In Lake Charles, where Centeno and her daughter live, the poverty rate was 23% in 2018 — before the pandemic made things worse.


Prioritizing low-income households after disaster strikes
When natural disaster strikes, the people who are hit the hardest are often those who had the fewest assets to begin with. And their predicament often gets worse, as federal disaster policies tend to prioritize people in the middle class and above. Carolyn Kousky of the University of Pennsylvania and Carlos Martín of the Urban Institute explain why disaster policies should provide equitable help to all:

Even before disaster strikes, lower-income households are often at greater risk from disaster impacts, living in more vulnerable areas and in less safe housing. They have less access to emergency preparedness, evacuation assistance, transportation, safe shelter, medical attention and child care during response efforts. These vulnerabilities are exacerbated by a disaster. Most U.S. households don’t have enough liquid savings to fund their own recovery, and lower-income households are often locked out of access to credit


A sheriff pleads for child care assistance
Even in the best of times, parents of young children often struggle to afford quality child care. But the Covid-19 pandemic has made this problem worse, particularly for front-line “essential” workers who can only do their jobs as long as there are child-care centers available to educate their kids. St. Charles Parish Sheriff Greg Champagne, in a letter to | The Baton Rouge Advocate, applauds the state Department of Education for expanding the availability of child-care subsidies to first responders, but warns that the money is about to run out. 

As we head into the fall, essential workers are still responding to the pandemic, but funding to maintain their access to affordable child care is running out. When the Louisiana Legislature reconvenes for its expected special session, legislators must provide additional funding to extend (Child Care Assistance Program) coverage for essential workers. Without this additional funding, we are placing an undue burden on those who have done so much to keep our communities healthy and safe.

Alissa Quart, writing in Slate, believes adequate funding will only come if parents start speaking with a collective voice in the way that senior citizens, gun owners and others have done for decades:  

(T)he Center for Law and Social Policy and the National Women’s Law Center estimate that a true stabilization package for the duration of the pandemic would cost $9.6 billion a month. Even that is a pittance compared with what is needed longer-term. A genuine universal child care system with high-quality care and solid salaries across the board would be more like a $70 billion annual proposition, according to Sen. Elizabeth Warren and others (Haspel and his ilk estimate it will cost much more: One Economic Policy Institute paper puts the cost between $337 billion and $495 billion).


Number of the Day
416,588 – The total number of workers in Louisiana being impacted by the cut of $600 per week of unemployment compensation  (Source: The Century Foundation)