The Louisiana Legislature kicks off a two-month lawmaking session on Monday where the central focus will be on making changes to the state tax structure and crafting a budget for the 2021-22 fiscal year. Gov. John Bel Edwards has said he wants any tax changes to be “revenue neutral,” meaning he’s OK with legislators shifting the tax burden between various groups as long as it doesn’t raise any new revenue to pay for programs and services. Will Sentell and Blake Patterson of Nola.com | The Advocate set the scene:   

Edwards has framed his budget priorities around providing the investments necessary to bolster the state’s education infrastructure, including $40 million to increase school teacher pay by $400 a year and $200 annually for school support staff, as well as $80 million dollars for pay raises for university faculty. The teacher pay raise plan has gotten a chilly reaction from educators, especially knowing that average pay is about $4,000 below the Southern regional average.

A major question for legislators is what to do with $3.2 billion in new federal aid for Louisiana made available through the American Recovery Plan Act (ARPA). Edwards has said his top priority for the money is to bail out the state Unemployment Insurance (UI) Trust Fund, so businesses could avoid a slight increase in their assessments. But LBP’s Jackson Voss writes that the state’s top priority should be to help those who need it the most. 

By centering human needs, racial and economic equity, and prioritizing infrastructure investments that will help secure and improve the well-being of our most vulnerable neighbors, friends, and family members, Louisiana can use coming federal dollars to come out of the pandemic with an economy and government that works better, and offers a better future, for all Louisianans. 

One way lawmakers can prioritize the neediest is by creating a fully refundable child tax credit. As research by LBP’s Neva Butkus has shown, Louisiana can help more than 800,000 children – and prioritize the youngest kids and those from the poorest families – for less than what the state spends each year to subsidize film and TV productions. 

Click here to read more about LBP’s priorities for the session. 

The cautionary tale of Bobby Jindal
With tax reform expected to take center stage this session, columnist Stephanie Grace takes us back to the last time our state government was running annual budget surpluses amid economic growth fueled by temporary federal stimulus dollars. The tax cuts signed by then-Gov. Bobby Jindal led to years of structural deficits and disinvestments in the people and programs that Louisiana needs in order to thrive. His successor vowed to chart a different path: 

If more money becomes available, (Edwards) said, it should go toward teacher pay raises and early childhood education, both longstanding needs that Louisiana lags in meeting. … Cutting taxes now would be “exactly what happened after the Katrina recovery,” he said. “We should never make the same mistake.” He would know. Jindal ignored his better instincts back in 2008 when he backed the big tax cut. But most lawmakers also supported the change, and not just Republicans. One of “yes” votes came from the governor himself, who was then a freshman representative.

Will Biden’s aid make a difference for George Floyd’s neighborhood?
As Derek Chauvin stands trial in Minneapolis for the murder of George Floyd, the Washington Post visits the segregated Houston neighborhood where Floyd spent most of his life. The American Rescue Plan Act has provided immediate help for families that are struggling to make ends meet during the pandemic. But as Toluse Olorunnipa reports, it’s unclear whether the federal investment will have long-term effects: 

The highly segregated slice of Houston’s diverse metropolis has been plagued by many of the same ills Biden has said his agenda is specifically tailored to fix: dilapidated housing, underfunded schools, food insecurity, health-care disparities, high unemployment and other forms of systemic inequality. Several government anti-poverty initiatives that swept through the Third Ward over the past half-century were unable to knock down those hurdles — leaving some in the community to question whether this time will be different.

The failure of Trump’s tax cut
President Joe Biden is proposing to pay for his massive infrastructure plan, in part, by raising taxes on corporations that benefited mightily from former President Donald Trump’s 2017 tax cut law. At the time, economists argued that America’s corporate income tax was a disincentive for companies to create jobs at home, and that lower rates would lead to greater investment and more jobs. As economist Paul Krugman explains in his New York Times column, those assumptions turned out to be wrong: 

(T)he tax cut’s architects insisted that corporations had been moving operations abroad to avoid U.S. taxes, and that slashing those taxes would bring millions of jobs back home. It didn’t happen. In fact, the tax cut had no visible effect on business investment, probably because it was addressing a fake problem. U.S. corporations hadn’t been moving jobs overseas to avoid taxes; they had just been avoiding taxes.

Internships available!
The Louisiana Budget Project is accepting applications for paid, part-time internships in its Baton Rouge office for Summer 2021. Click here to learn more and apply!

Number of the Day
11.9% – Share of family income that goes to pay state and local taxes for Louisiana households in the bottom 20% of earners (less than $17,100 per year). The richest 1% – with taxable incomes above $473,000 – pay 6.2% of their income in state and local taxes. (Source: ITEP)