Another big day for tax reform

Another big day for tax reform

The Legislature’s efforts to overhaul Louisiana’s troubled tax structure continue on Monday, when the House Ways & Means Committee is slated to take up 30 different bills dealing with everything from sales tax exemptions to property assessments. But the key to any comprehensive tax reform, as Mark Ballard of The Times-Picayune | The Advocate explains, is eliminating the state income-tax deduction for federal taxes. 

The break allows taxpayers to reduce their tax burden to the state by claiming deductions they were able to take on their federal returns. It’s used primarily by our wealthier neighbors and forgives about $1 billion in revenues that otherwise could be used to pay for annual expenses.

Several proposals working their way through the process would swap an end to the federal income tax deduction for lower income tax rates. The AP’s Melinda Deslatte writes that the Legislature appears undecided about the details of the tax swap: 

The House tax committee, overseen by Lafayette Republican Rep. Stuart Bishop, has advanced competing bills and didn’t choose an approach between a flat tax or different tax rates tied to income levels. Instead, the full House will have to decide what system it prefers. (Gov. John Bel) Edwards said he’s open to a flat tax for the corporate income tax, but doesn’t support that for individual income taxes. He said graduated rates that increase as income is higher “is the fairest system.”

Legislators don’t have to use the money to reduce tax rates. A better idea would be to use at least some of the revenue from the federal deduction to expand the state Earned Income Tax Credit and create a new tax credit for low- to moderate-income households with children, as Reps. Ted James (House Bill 299), Jason Hughes (House Bill 660) and Matthew Willard (House Bill 659) are proposing. All three bills are up for debate this morning.  

The myth of the ‘low-skilled’ worker
Policymakers and academics on the left and right have spent decades lamenting the plight of “low-skilled” workers – the Americans who work in restaurants, retail, home health and many other jobs we now recognize as “essential” thanks to the Covid-19 pandemic. Economic growth, the theory goes, rests on making sure these workers acquire the specialized skills and training needed for higher-paying jobs. But The Atlantic’s Annie Lowery notes that labeling certain jobs and workers as “low-skill” is an imprecise exercise, fraught with racial bias, and overlooks the fact that all working people deserve a decent wage.  

The problem lies not with American workers, but with American jobs and American policy infrastructure. Too many jobs pay too little. They’re too dangerous. They offer too few benefits. They offer no union representation. They are inaccessible to millions of Americans who are pushed out of the labor market by illness, disability, poverty, the arrival of young children, or discrimination. All jobs could be good jobs. But only policy makers and business leaders have the skills to make that happen, not workers.

Biden’s tax plan doesn’t go far enough
President Joe Biden plans to unveil an ambitious $1.8 trillion plan this week that would make historic investments in child care programs, paid family leave, tuition-free community college and other social spending. To pay part of the tab, Biden will propose raising taxes on the wealthiest Americans, starting with restoring the top marginal tax rate to 39.6%, which is what it was until 2017. But Washington Post columnist Paul Waldman argues the plan doesn’t go far enough, since the highest rates only apply to incomes above $1 million. 

That means that when Biden decides to make a change like the one he’s proposing to capital gains, it can’t honestly be presented as a fundamental change that puts core ideas of fairness into practice across the board. It’s a tweak, an adjustment, just one of a grab bag of changes that might all be focused on the wealthy, but don’t embody the kind of simple, principle-driven reform we ought to be making to the tax code, especially at a time when we’re rethinking so much about what government does.

Who should pay for the oil companies’ messes? 
More than 100 years of oil and gas drilling in Louisiana has left quite a mess. The state counts at least 4,300 uncapped “orphaned” wells – the true figure is almost certainly higher – that would cost an estimated $200 million to clean up. The question is, who should pay for that cleanup? A plan being pushed by the White House would spend up to $16 billion to clean up an estimated 2 million wells around the country, employing people laid off from the industry to do the work. Columnist Bob Marshall, writing in The Times-Picayune | Baton Rouge Advocate, thinks we can do better: 

One of the smartest (options) was proposed in a recent edition of Current Affairs by Megan Milliken Biven, a New Orleanian who got an inside look at the oil industry while working for the Bureau of Ocean Energy Management. Her “Abandoned Well Act” would take the job away from the industry that caused the problems and create the federal Abandoned Well Administration to oversee the initial cleanup. At the same time, the act would create realistic bonding requirements and levee fees on the industry to pay for future cleanups.

Number of the Day
$967 – Amount, per resident, that New Orleans will receive in federal aid through the American Rescue Plan Act (ARPA). Other cities and parishes are not as lucky, with Baton Rouge receiving an estimated $431 per resident (Source: The Advocate)