“Revenue neutral” isn’t good enough

“Revenue neutral” isn’t good enough

Gov. John Bel Edwards warned lawmakers Wednesday that any changes to Louisiana’s tax system will have to be “revenue neutral” to win his approval during the upcoming session. Speaking at a virtual forum hosted by former state Rep. Julie Stokes, the governor said he supports eliminating the ability to deduct federal income taxes on state returns, but wants to use that revenue to lower income tax rates for people and corporations. Will Sentell from The Times-Picayune | Baton Rouge Advocate reports:

Edwards said he backs “real tax reform” as long as it keeps state revenue collections steady. The governor noted that Louisiana’s 0.45% state sales tax hike, which was enacted in the midst of the recent state financial crisis, is set  to expire in 2025 and will cost the state about $500 million per year.

While “revenue neutral” might make political sense in a year when the state is set to receive $3.2 billion in emergency federal funding, it ignores the fact that Louisiana teachers are grossly underpaid compared to their Southern peers, higher education has yet to recover from the devastating budget cuts of the last decade and new investments are needed to support early care and education services across the state.

Jeff Landry is wrong about the tax-cut provision
Louisiana Attorney General Jeff Landry recently joined 20 of his GOP peers in objecting to language in the $1.9 trillion American Rescue Plan Act that says states cannot use their federal relief dollars to pay for tax cuts. Landry called the provision “an unprecedented and unconstitutional intrusion” on states’ rights. Georgetown University law professor David Super, writing in The Washington Post, sets the record straight. 

Constitutionality aside, it’s worth examining the rhetoric of federalism and state sovereignty at play here. Republicans are not saying that their states should be left alone. They argue that they should have the right to take federal money — intended for other purposes — and shift more of the burden of supporting basic state services onto Washington. It is relevant, in this context, that 20 of the 21 attorneys general lodging this objection serve a state that is already a net recipient of federal funds (Utah being the lone exception). Far from strong, independent sovereigns, the states making this case sound more like petulant adolescents who demand a raise in their allowances — but then quit their paper routes and announce they won’t be raking the leaves.

Racism and the U.S. tax code
The U.S. tax code can seem to be neutral when it comes to race. But changes to America’s tax code often benefit white taxpayers at the expense of Black ones. Dorothy A. Brown, a tax law professor at Emory University, wrote a book about the subject. In a new article for the Atlantic, she looks at the history of the joint tax return, the “marriage penalty” and its disproportionate effect on low-income Black families. 

The Trump tax cuts temporarily eliminated the marriage penalty for nearly everyone. That was accomplished by a change to the rate structure that doubled the bracket for a single taxpayer, to account for the possibility of two equal earners. Those rate-structure changes ignored households at the low end that were eligible for the earned-income tax credit, and those at the high end. Households at the low end continue to face marriage penalties, but the same is not true for high-end married couples. Why? Because, as I found in my research, most of those high-income white married couples are in marriage bonus households, whereas their Black peers are more likely to be in marriage penalty households, even at high income levels.

Hitting Pause on Big Oil has Jeff Landry Up in Arms
Gov. John Bel Edwards and Attorney General Jeff Landry don’t agree on much. But they are both pushing back against President Joe Biden’s decision to temporarily pause new leases for oil and gas extraction as part of an emerging climate change agenda. Landry this week joined 12 other states in suing to overturn the moratorium, which critics say could deprive the state of revenue that supports coastal restoration. But as the AP’s Kevin McGill reports, there are plenty of undeveloped leases in the stockpile, and the moratorium does nothing to halt ongoing production.  

Biden’s team has argued that companies still have plenty of undeveloped leases — almost 14 million acres (6 million hectares) in western states and more than 9 million acres (3.6 million hectares) offshore. Companies also have about 7,700 unused drilling permits — enough for years. “This will not affect oil and gas production or jobs for years to come,” White House Press Secretary Jen Psaki said when asked about the lawsuit’s claims at a Wednesday briefing. Louisiana Gov. John Bel Edwards, a Democrat, is urging the White House to reconsider the moratorium, but he also pointed to the stockpiled undeveloped leases to suggest the economic threat isn’t imminent. He said the Biden administration has started to issue permits for those stockpiled leases. “Just as you’re starting to have the communications get you to a point where you’re feeling better about things and the permits are being issued probably isn’t the best time to file litigation,” Edwards said.

Didja Know? 3-25-21: Unemployment Insurance Trust Fund
Louisiana is set to receive $3.2 billion from the American Rescue Plan Act. Business lobbyists want part of the money to be used for bailing out the state’s unemployment insurance trust fund, and have found an ally in Gov. John Bel Edwards’ administration. But LBP policy analyst Neva Butkus thinks this is a bad idea. In our latest episode, she breaks down the structural issues with Louisiana’s unemployment insurance system – and how to fix them – and better ways to use federal relief dollars so that they are reaching the people who need it most. Click here to listen. 

Number of the Day: 
414- The number of people hospitalized for Covid-19 in Louisiana, the lowest in nearly a year. (source: The Advocate)